Stock investors have overreacted to media speculation over merger and acquisition (M&A) talks among the nation's financial institutions, which have contributed to the recent up-and-downs of the financial sector's shares, market watchers said yesterday.
"There may be a willingness among financial holding companies to initiate M&A talks, but none has finalized any ideal candidates in spite of market-rift rumors," said William Fong (
Investors have recently speculated more on financial shares than other shares because the financial sector's upward momentum is expected to outperform shares of other sectors, including blue-chip electronic shares, Fong said.
Against this backdrop, local Chinese-language media recently reported intensively that SinoPac Holdings Co (
The media yesterday also reported that Mega Financial Holding Co (兆豐金控) is aggressively seeking to merge with state-controlled First Financial Holding Co (第一金控). Both rumored-to-be-merged financial holding companies, however, flatly denied such media speculations, despite bank-merger plans usually exciting investors and bringing up their stock prices.
For example, SinoPac shares nearly doubled from NT$10.06 per share in May to Thursday's high of NT$20.2, although they slightly declined yesterday to close at NT$18.6.
"The price decline is just a short-term phenomenon and we have a bullish view toward SinoPac shares in the long run," Mike Chow (
SinoPac, which has a low bad-loan ratio with relatively small stock capital and above-par banking performance, has made itself a very popular candidate for M&As, Chow added.
The financial sector overall, nevertheless, is sure to come out of a decade-long recession and gradually turn upward, as the sector's weighted index has risen from November's 834.02 points to yesterday's 875.6 points, Chow said.
"The index may further climb over 922.54 points before the first quarter next year," Chow said, adding that the worst is over for the financial sector.
It appeared to pay off for banks, which aggressively wrote off their bad loans and consolidated themselves through M&As for the past two years.
The Ministry of Finance, moreover, announced on Thursday that the nation's insurers will be allowed to use its liquidity cash, including reserves, to undertake mergers by taking up majority shares, or so-called "hostile takeovers" -- a policy change that may also fuel the sector's M&A activities.
But Primasia's Fong yesterday dismissed such worries, saying few local insurers have had experience in undertaking hostile takeovers, which may backfire to negatively impact stock shares if managed carelessly.
A senior investment banker specializing in M&A businesses agreed, saying only capital-abundant Cathay Financial can afford to buy out other smaller financial companies.
"The remaining insurers are either cash-restricted or unmotivated," the banker said.
The banker also believes that M&A activities among financial institutions will continue at a slower pace.
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