Fri, Jan 10, 2003 - Page 11 News List

Financials decline ahead of an anticipated rate cut

BLOOMBERG , TAIPEI

Stocks fell for the first day in six, led by banking services companies such as First Financial Holdings Co (第一金控), on concern bank clients may withdraw funds and demand cheaper loans amid a possible central bank interest rate cut.

Taiwan's central bank may cut its key rates by 25 basis points around the Lunar New Year holiday that begins at the end of this month, a local Chinese-language economic daily reported, citing unidentified people.

"Another central bank rate cut will further pump liquidity from the banking system into stocks," Jerry Chen, who manages the NT$3.5 billion (US$101 million) Excellent Fund at First Global Investment Trust Co(元大投信). "Banks will have to grant cheaper loans."

The TAIEX declined 23.20, or 0.5 percent, to close at 4,813.73. About one stock rose for every one that fell. The total value of trade was NT$123.97 billion.

First Financial, the nation's seventh-largest financial company, fell NT$0.2, or 0.7 percent, to NT$26.7. Mega Financial Holdings Co (兆豐金控), the third largest, fell NT$0.4, or 2.3 percent, to NT$17.8.

Taiwan's overnight interbank rate fell to a new low of 1.368 percent yesterday, below the central bank's key rediscount rate of 1.625 percent, indicating market participants expect the central bank to lower rates, the report said.

Petrochemical makers such as Nan Ya Plastic Corp (南亞塑膠) gained after Chinese Petroleum Corp (中油), the nation's largest refiner, raised prices by an average 2.5 percent.

Nan Ya Plastic, which controls Taiwan's second-largest oil refiner Formosa Petrochemical Corp (台塑石化), climbed NT$1.6, or 4.7 percent, to NT$35.70.

"Investors are withdrawing bank deposits to chase manufacturing stocks as interest rates decline," said Jessica Chen, who manages NT$2.8 billion (US$81 million) at Fubon Securities Investment Trust Co (富邦投信).

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