Taiwan to sell 3.5 percent stake in China Steel Corp

The government plans to sell a 3.5 percent stake in China Steel Corp (中鋼) worth NT$11.6 billion (US$347 million) by the end of this year to trim its budget deficit, Minister of Economic Affairs Ho Mei-yueh (何美玥) said.

The Legislative Yuan asked the Cabinet not to cut its 23.5 percent shareholding in the nation's biggest steelmaker below 20 percent, Ho said. That obstacle may be overcome after legislative elections on Dec. 11, she said.

"Maybe after the elections we will try to persuade the legislature to agree on selling the remaining 20 percent," Ho, 53, said yesterday.

The government on Sept. 2 said it may sell shares worth NT$107.8 billion in Taiwan Tobacco & Liquor Corp (台灣菸酒公司) and other companies next year to help plug a budget deficit forecast to reach a record NT$304 billion this year. The government also needs money to pay interest on record national debt of more than NT$3 trillion.

"It's no surprise that the government wants to sell China Steel shares," after gains this year, said Kevin Yang, a fund manager for International Investment Trust Co (國際投信).

Yang said he has an "underweight" rating on the stock and will keep "basic holdings."

China Steel shares have gained 23 percent this year as higher prices and demand boosted profit. The 3.5 percent stake is equal to 346 million shares. The stock fell 0.6 percent to close at NT$33.60 on the Taiwan Stock Exchange.

China Steel had a 52 percent increase in third-quarter profit to NT$14.3 billion in the three months ended Sept. 30, from NT$9.4 billion a year ago. Sales rose 34 percent to NT$45.2 billion. The figures were derived by subtracting first-half from nine-month profit posted by the company.

China Steel and rivals such as Nippon Steel Corp of Japan and Shanghai Baosteel Group have benefited from China's rising demand for steel. China Steel, which sells more than a third of its exports to China, has raised prices each quarter since the second quarter of 2002.