Mortgage-backed security sells well on its first day

Taiwan's first commercial mortgage-backed security yesterday sold out during its first trading day on the Gretai Securities Market (櫃台買賣中心), the nation's over-the-counter market.

The sale of seven-year bonds backed by an office building in downtown Taipei aims to raise NT$4.41 billion, according to one of the sale's arrangers, Industrial Bank of Taiwan (台灣工銀).

The building is owned by Tong Yang Chia Hsin International Corp (嘉新國際), an affiliate of Chia Hsin Cement Corp (嘉新水泥), and tenants include International Business Machines Corp, ABN Amro Holding NV and J.P. Morgan Chase & Co.

"Institutional investors including fixed-income investors and investment banks triggered a buying rush, subscribing most of the shares with a minimum price of NT$1 million," the industrial bank's public relations manager yesterday quoted chairman Kenneth Lo (駱錦明) as saying.

The public relations manager said that NT$2.13 billion-worth of beneficiary shares with a fixed interest income of between 2.3 percent and 2.6 percent were sold to investors. Chia Hsin Cement holds the remaining NT$2.28 billion in secondary beneficiary bonds, he said.

Chia Hsin has a healthy financial portfolio and its office building is fully occupied. The prospect of long-term and stable rental incomes attracted many investors to yesterday's deal, Lo told a press conference yesterday morning.

Lauding the success of yesterday's bond sale, Deputy Finance Minister Susan Chang (張秀蓮) said that the issuance of local property-backed securities not only helps property owners refinance their loans if the property market is depressed or overheated but also provides investors with investment opportunities in fixed-income shares.

Following last July's passage of the Real Estate Securitization Statute (不動產證券化條例), a legal framework for securitization has been set to help provide low-cost liquidity to property owners as well as diversification and higher returns to investors while reviving the local property market.

The statute, which was enacted to boost the local capital market and the sagging property market, defines "real estate" as land, buildings, roads, bridges, tunnels, tracks, piers, parking lots and objects built above ground with economic value.

According to Lo, yesterday's bond sale was also the industrial bank's first deal, and will be followed by more deals including several issuances of securities backed by Far Glory International Center (遠雄國際中心) and Shinkong Life Insurance Co's (新光人壽) service apartment -- Jasper Villa (傑仕堡) in Taipei's Tienmu district.