Fri, Mar 26, 2004 - Page 10 News List

Investors flee to high-yield stocks amid uncertainty

ON THE RUN Taiwan Cellular is the kind of company investors are looking to because its dividend is high and its volatility is relatively low


Shares in the nation's leading mobile service provider, Taiwan Cellular Corp (TCC, 台灣大), jumped nearly 1 percent yesterday as investors snapped up high-yield stocks in pursuit of shelter from the recent political uproar, industry experts said yesterday.

TCC shares rose NT$0.3 to end at NT$32.5 each on the TAIEX, outperforming the benchmark index's 0.91-percent fall to 6,156.73 points yesterday.

"Investors are looking to high-yield stocks including TCC and China Steel Corp (中鋼) to avoid losses in the midst of political uproar," said Kevin Chung (鐘國忠), a deputy manager at Jih Sun Securities Investment Consulting Co (日盛投顧).

TCC's board earlier this year approved a NT$2.4 cash dividend, which represented a 7.38 percent yield based on yesterday's closing price.

"The yield is much higher than the 2 percent local lenders give to one-year-term depositors," he said.

TCC shares have risen 22.6 percent since Harvey Chang (張孝威) became its president in a management reshuffle last October, Chung said. The TAIEX rose 9.7 percent during the same period.

In light of the strong performance, Chang said his company was not considering buying back its own shares, as 62 other companies have been doing this week to buoy their share prices.

Chang, a former chief financial officer of top chipmaker Taiwan Semiconductor Manufacturing Co (台積電), pledged to boost the company's poor financial transparency and improve the complicated cross-holdings between TCC and its affiliates, a long-term concern for investors.

"Indeed, the appointment of Chang has greatly boosted investor confidence in the company's finances. But we don't expect a spike in profits due to Taiwan's high mobile penetration," said Chris Tan (譚志忠), a telecom analyst at Yuanta Core Pacific Capital Management (元大京華投顧).

TCC's earnings per share before tax are expected to grow at a moderate 10-percent pace to NT$3.4 this year, Chung forecast.

"TCC has been a foreign investors' favorite, but not for local investors. The stock prices are just too stable to make big profits," Tan said.

Tony Tsai (蔡東松), a director of corporate ratings at Taiwan Ratings Corp (中華信評), a local arm of Standard & Poor's, agreed with Tan.

"We only expect TCC's financial transparency to improve over time. Chang, at least, already set a target to lower the corporate debt-to-equity ratio to below 50 percent next year and gradually sell shares in TCC's subsidiaries," Tsai said.

Chang told reporters yesterday that his company plans to use the NT$6 billion proceeds by divesting several of TCC's subsidiaries, including Taiwan Fixed Network Co (台灣固網), to write off the debt.

Taiwan Ratings will keep unchanged TCC's long-term corporate ratings at TW+, Tsai said.

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