Formosa Plastics Group shares surge on report

Shares in the three largest units of Taiwan's Formosa Plastics Group (台塑集團) rose to record highs after newspaper reports that the group plans to sell stock in its China-based subsidiaries in Hong Kong.

Formosa Plastics Corp (台塑) jumped 5.5 percent to NT$72.4 by the close of Taiwan Stock Exchange at 1:30pm after surging 7 percent, the maximum daily movement allowed by the exchange. Nan Ya Plastics Corp (南亞塑膠) climbed 3.7 percent to NT$65.2, while Formosa Petrochemical Corp (台塑石化) advanced 4.8 percent to NT$80.7.

Formosa Plastics may spin off China-based divisions and list their shares in Hong Kong, the Chinese-language Commercial Times reported yesterday, citing a company official it didn't name. Nan Ya Plastics may be the group's first unit to do so, it reported.

"Listing shares of units in Hong Kong makes sense," said Ernest Chiang, who owns Formosa Petrochemical stock among the US$27 million of assets he manages for Industrial Bank of Taiwan Investment Trust Co (台灣工銀投信).

The plan would enable Formosa companies to evade political interference in Taiwan, he said.

Listing in Hong Kong may allow Formosa Plastics to bypass Taiwan's restrictions on investing in China, imposed because of concern companies there may grab business from the nation.

"At present we don't have such a plan," Wu Chia-chau (吳嘉昭), vice president at Taipei-based Nan Ya Plastics, said by phone from the company's headquarters yesterday. "I can't tell you what'll happen in the future."

Taiwan's government bars the nation's companies from producing ethylene in China because of concern that Taiwanese petrochemical makers may lose sales.

Ethylene is used in the manufacture of plastics and chemicals. Taiwan also bans companies from investing more than 40 percent of their net value in China.

Still, China is the largest overseas investment destination for Taiwanese, with more than US$150 billion invested. Companies have built production lines on the mainland to lower costs and be closer to their clients.

Nan Ya Plastics, the world's largest processor of plastics, has remitted NT$27.2 billion (US$815 million) to China, where it has more than 30 plants making products including pipes, imitation leather and electronics components such as materials used to manufacture printed circuit boards, according to the Taiwan Stock Exchange's Web site.

Formosa Plastics Corp has invested NT$9.76 billion.

Units of Formosa Plastics Group, Taiwan's biggest diversified industrial company, include Formosa Petrochemical, the nation's only publicly traded oil refiner, and Formosa Plastics Corp, the world's second-biggest maker of polyvinyl chloride, or PVC.