Fri, Jul 16, 2004 - Page 11 News List

Officials back Fubon acquisition

FUND MANAGERS The government threw its full support behind Fubon Securities Investment Trust Co's decision to purchase three bond funds from United Securities


Financial authorities yesterday threw their support behind Fubon Securities Investment Trust Co's (富邦投信) decision to buy three bond funds from United Securities Investment Trust Corp (聯合投信).

"We are glad to see that the private sector can solve the problem itself," said Lu Tung-ying (呂東英), a committee member of the Cabinet-level Financial Supervisory Commission.

Fubon Securities, Taiwan's second-largest mutual fund manager, has decided to buy three bond funds from United Securities, president Michael Ding (丁予嘉) said.

United Securities, a closely held mutual fund, has been unable to meet redemptions on its United Fund (聯合), United Triumph Bond Fund (雙盈) and Wei-Li Fund (威利), a Chinese-language newspaper reported yesterday.

About NT$24 billion (US$710 million) was withdrawn in the past two days from the three funds, the newspaper reported.

The three funds were estimated to have NT$10 billion (US$295 million) in assets as of yesterday, Ding said in a phone interview.

Due to respect for the market mechanism, Lu said that the commission will not step in to bail United Securities out from its failure of meeting redemptions by bond buyers, although a legal ruling has empowered the commission to do so.

United Securities yesterday received approval from the commission's Securities and Futures Bureau to halt redemptions on the three bond funds from today.

Lu also expressed his hope that bond investors can restore their confidence in the three bond funds.

"The image and pricing process of investment trust companies is very important, which will determine the degree of investor confidence," Lu said.

Although the commission's securities and futures bureau has approved United Securities halting redemptions on the three bond funds, the bureau's deputy director-general, Jong Huey-jen (鍾慧貞), yesterday said that the broker still retains its license, which allows it to continue to manage its six other bond funds, in spite of its tainted reputation.

To prevent similar redemption failures from happening in the future, Jong yesterday added that her bureau is working on measures to have all bond funds reviewed and rated by the Securities Investment Trust & Consulting Association to safeguard investors' rights.

The measures will be proposed in three months, she added.

"The move will help stabilize the market, not to mention helping us become Taiwan's No. 1 mutual-fund company," said Ding, who is also chief economist of Fubon Financial Holding Co (富邦金控), Taiwan's fifth-largest financial services company, which owns Fubon Securities.

Fubon Securities Investment manages NT$152.2 billion worth of assets, or 5.2 percent of Taiwan's total mutual funds, as of the end of last month, according to the Securities Investment Trust and Consulting Association, an industry group. PCA Securities Investment Trust Co, a unit of UK-based Prudential Plc, manages NT$155.1 billion of assets.

United Securities Investment -- 40 percent owned by Macquarie Bank Ltd of Australia -- manages a total of NT$45.4 billion of assets, according to the association.

Taiwan's mutual funds have a combined size of NT$2.9 trillion at the end of last month, with 78 percent of them in bonds, according to the association's statistics. Institutional investors such as insurance companies are the main investors for bond funds.

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