Weaker local banks are expected to face increasing difficulty in erasing their debts, as the risk premium spread rises, Taiwan Ratings Corp (中華信評) said in a research note released yesterday.
"The collapse of the Rebar Asia Pacific Group [力霸亞太集團] and concerns that the regulator [the Financial Supervisory Commission] may take over more weak banks led the market to increasingly favor more creditworthy institutions in the first half of this year," said Eunice Fan (范維華), an analyst with Taiwan Ratings, the local arm of the US-based Standard & Poor's Ratings Services.
Risk premiums on the issuance of debentures are therefore likely to widen among domestic banks, which in turn will affect debt-raising capacity of weaker lenders and step up their funding costs, Fan said.
According to Taiwan Ratings' statistics, banks rated twAA-, the fourth-highest grade in long-term credit rating that indicates strong credit worthiness, saw their cost of issuing debts decrease by 10 to 20 basis points, while their lower ranked peers saw their cost rise by at least 30 basis points.
After a quiet start, debt issuance is likely to rev up over the second half of the year, Taiwan Ratings said.
Banks have largely been absent from the market since last year, when they aggressively issued subordinated debts to enhance their capitalization before the implementation of Basel II, a new system to gauge banks' financial soundness.
The total issuance of debentures totaled NT$50 billion (US$1.52 billion) in the first half of the year, down from NT$71.5 billion a year ago, Taiwan Raiings' data showed.
Banks are likely to return to the debt market to boost their capital bases and lock in lower interest rates for long-term funding before interest rate hikes expected by the end of the year, the agency said.
Compared with stand alone banks, financial holding firms may be less active in this regard, however, it said.
"Financial holding companies have had little need to raise new debt this year, given the dearth of major merger and acquisition activity in Taiwan's financial sector, and that situation is not likely to change anytime soon," Fan said.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to