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Analysts surprised over appointment

Analysts yesterday expressed surprise about the Ministry of Finance's last-minute decision to appoint Lin Cheng-yi (林誠一) as the new Chairman of China Development Financial Holding Co (中華開發金控), saying they were unsure whether his appointment could benefit the company -- at least for the time being.

"We are very surprised [about the ministry's decision]," said Chun Huang (黃俊榮), an associate of financial services at Taiwan Ratings Corp (中華信評), a local arm of Standard and Poor's Ratings Service.

As more uncertainty over the chairmanship could be destructive for the company, yesterday's settlement of the issue is relatively positive for the financial services provider, Huang said.

But time will tell whether the two concerned parties -- the government, which controls seven seats on the board, and the Koo family, which also holds seven seats -- can really work smoothly together in the future, he added.

Lin was chosen to replace former chairman Chen Mu-tsai (陳木在) after Chen was asked to leave because of his ambiguous role in the company's hostile takeover bid for Taiwan International Securities Corp (金鼎證券).

Nevertheless, whether or not the personnel change will cast uncertainty over the proposed merger deal remains to be seen, said Jesse Wang (王嘉樞), head of research at BNP Paribas Securities Taiwan Co.

"We do not welcome the deal," as the brokerage's continuous losses could encumber the financial holding firm's overall performance and further dilute shareholders' returns, Wang said.

To win the confidence of investors, China Development Financial also needs to improve its transparency in decision making and comply with principles of corporate governance, he added.

BNP Paribas gave a "reduced" rating for China Development Financial and cut the target price to NT$11 from NT$12. Shares of China Development Financial remained unchanged at NT$12 on the Taiwan Stock Exchange yesterday. The announcement of Lin's appointment came after the close of the stock market.
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