Minister downplays China Development share buy-up rumor

With corporate governance disputes snowballing in the Koo family-run China Development Financial Holding Co (中華開發金控), rumors have spread that the government is gearing up to buy shares in the lender to reassert public control.

But Deputy Minister of Finance Liu Teng-cheng (劉燈城) yesterday downplayed such speculation.

Shares of China Development rose 1.8 percent to close at NT$14 on the Taiwan Stock Exchange yesterday, after the Chinese-language Commercial Times reported that Central Trust of China (中央信託局), First Taisec Securities (一銀證券), a subsidiary of First Financial Holding Co (第一金控), and Lank Bank of Taiwan (土地銀行) have been increasing their holdings in China Development in recent weeks.

The paper also said that state-run Taiwan Cooperative Bank (合作金庫銀行) had joined the fray, picking up 20 million shares as of yesterday.

Even the privately run Cathay Financial Holding Co (國泰金控) had reportedly raised its stake in the nation's 12th-largest provider of financial services.

However, the newspaper report did not cite sources, and Cathay Financial issued a statement denying it had played any part in a government buy-up.

A Land Bank official who refused to be named yesterday confirmed that the share buying was merely short-term speculation and denied that it had occurred because of an official order.

Commenting on the report, Liu said that the government had not instructed state-run financial institutions to raise their stakes in China Development as "the opportune moment has yet to come."

Minister of Finance Ho Chih-chin (何志欽) announced in September that if the major private shareholder, the Chinatrust Group (中信集團), upheld its promise to increase its stake in China Development to 15 percent before April and has a clean record of corporate governance, the government would gradually release its shares in the firm as part of efforts to boost the banking sector's competitiveness.

If not, the government would increase its shareholdings or solicit proxy votes in order to reestablish managerial control, Ho said at the time.

Angelo Koo (辜仲瑩), whose KGI Securities Co (中信證券) has a stake of less

than 10 percent in China Development, teamed up with the finance ministry —

which now has a stake of between 6 and 7 percent in China Development — to

secure the majority of seats on the China Development board in April 2004.

But China Development's hostile takeover of Taiwan International Securities

Corp (金鼎證券) and the recent string of investigations into Chinatrust

Financial Holding Co (中信金控), chaired by Koo's father Jeffrey Koo (辜濂

松), regarding its controversial investment in Mega Financial Holding Co (兆

豐金控) have raised concern about the Koo family's operational credibility.