Financial stocks were lackluster on the local bourse yesterday in the wake of a possible policy turnabout, as the government announced it could drop its target of halving the number of financial holding firms by the end of the year.
President Chen Shui-bian's (
The finance sub-index was up marginally by 0.06 percent in comparison with the benchmark index, which advanced 0.76 percent on the Taiwan Stock Exchange yesterday.
The Cabinet yesterday confirmed that the government may fine tune its financial reform scheme, a move made in the face of mounting public concern that the government's plans may only benefit a few rich families as it hurries to dispose of state shareholdings, selling them at too low a price.
However, analysts did not seem surprised by the policy turnabout, saying that the decision was more realistic, as the former target had been impractical and unattainable.
"We remain neutral about the change," said Jonathan Lee (李信佳), senior director of financial institutions at Fitch Ratings Ltd's Taiwan Branch. "The numerical target was not necessary from the outset ? as it was not easy to achieve the goal while the majority of financial groups are privately owned."
What the government should have done was to make clear the rules of the game to facilitate consolidation under existing market mechanisms, Lee said.
Lee, however, expected the consolidation of the financial sector to slow, as the government may have second thoughts when it comes to disposal of its shareholdings in state-controlled financial holding firms.
Shirley Yang (
The consumer loan issue is a bigger risk to the finance sector and stocks than any other, Yang said.
But consolidation will still occur this year, just not among financial groups as the authority had expected, as standalone banks like Ta Chong Bank (
State-controlled financial holding firms yesterday stayed low-key about a policy change that could help lessen the chances of them being taken over by their private peers.
Joseph Shieh (
To Chinatrust Financial Holding Co's (中信金控) chief strategy officer, Lin Shiaw-pin (林孝平), the number of financial holding firms will not contract for the foreseeable future, as most of the private companies had completed takeovers of smaller rivals and may not have enough resources left to acquire any more of their peers.
Chinatrust Financial, the nation's sixth-largest financial services provider, has reportedly bought a near 15-percent stake in Mega Financial and is looking to obtain up to four seats on the board of its bigger rival.
Since mergers and acquisitions are the fastest way to achieve economies of scale and competitiveness, the company's expansion plans will not be affected by the policy change, said Lin, who declined to elaborate further.
In response, the Financial Supervisory Commission said it would continue to promote consolidation and improve market conditions by legal relaxations to spur mergers and acquisitions in compliance with existing market mechanisms.
The commission's aim to create at least three banks with a market share of more than 10 percent and having one local bank run by foreign rivals or listed overseas by next year remained intact, the financial watchdog said.
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