Financial shares jumped yesterday on speculation that the government would ease rules on local banks investing in China ahead of the presidential elections in March, but analysts warned that it was too early to celebrate even if the news were true.
Fubon Financial Holdings' (富邦金控) share price surged 7 percent to NT$31.1 on a report by the Chinese-language Economic Daily News that the government would approve its application to invest in Xiamen Commercial Bank through its Hong Kong subsidiary before the March poll.
Shares of Cathay Financial Holdings (
On average, the financial sector gained 3.4 percent yesterday, outperforming the benchmark index's 1.01 percent rise.
"The question is: Do Taiwanese banks still have room to compete in China even if the restrictions were lifted right now?" Masterlink Securities (
"Although a large number of banks might say `better late than never,' I doubt whether they can make a profit in three to five years in China," Ou said.
As of the end of 2006, a total of 29 foreign banks had invested US$19 billion in 21 local banks, China's Banking Regulatory Commission statistics showed.
Both the Financial Supervisory Commission (FSC) and Mainland Affairs Council were mum on policy changes, while Fubon said it had not submitted an application to invest in a Chinese bank.
"No policy changes will be made unless all government departments supervising cross-strait investments reach a consensus," FSC vice chairperson Susan Chang (
Asked whether the government would allow domestic banks to hold shares in Chinese banks, Mainland Affairs Council Chairman Chen Ming-tong (陳明通) said he "had no further comment" except to say that "the government has been deliberating on that."
Chen said the government was not able to proceed with its policy easing, which was put on the consensus list in the Conference on Sustaining Taiwan's Economic Development in July 2006, because "there were no applicants."
Commenting on the news, Citigroup Global Markets' equity analysts Bradford Ti (
Ti and Lu said in a client note released yesterday that the likelihood of a "broad opening is likely a post-election rather than a pre-election story at this point."
"Rhetoric from China is equally important and whether they insist on quid pro quo agreements on the issue," the analysts said.
They added that a "banking system reform or [opening up of] cross-strait banking" could help drive up market momentum for local financial shares and trigger a "re-rating" on the sector.
Citigroup has a "long-term de-rating" on the sector.
As the only Taiwanese bank that has a subsidiary in Hong Kong, Fubon is most likely to benefit from a market deregulation, Capital Securities (群益證券) analyst Benson Wang (王建民) said by phone.
"Cross-strait negotiations remain the biggest hurdle in the government's lifting of mainland investment restrictions, but it is relatively easier for Taiwan to reach an agreement on banking settlement and regulating negotiations with Hong Kong than China," Wang said.
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