Thu, Jul 10, 2008 page12

• FSC chairman calls for investor calm

  OPTIMISTIC Gordon Chen said most companies had shown sound performance over the past year, with 44.5 percent registering 16 percent year-on-year growth

  • By Joyce Huang / STAFF REPORTER
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  Financial Supervisory Commission (FSC) Chairman Gordon Chen (陳樹) sought yesterday to appease investors’ fears, saying that domestic stocks were now cheap and would provide satisfying returns.

  The TAIEX currently averages a price-to-earning (PE) ratio of 14.66 with a 4.89 percent yield, which is more rewarding than bank savings at less than 3 percent, Chen told a media briefing yesterday after the local bourse fell to a 20-month low yesterday.

  He said most companies had shown sound performance in the past 12 months. As of 3pm yesterday, 44.5 percent of the country’s 563 listed companies had seen a 16 percent year-on-year growth in their earnings for the first-half.

  “Investors have every reason to be optimistic about the TAIEX since the government has planned many stimulus measures to boost the local economy, including relaxing regulations on cross-strait ties,” he said, adding that the economic fundamentals remained solid.

  The commission, however, did not provide any further short-term measures to prop up the TAIEX, which dropped 0.05 percent to 7,048.25 points.

  So far this year, the TAIEX has declined 17.14 percent, Taiwan Stock Exchange figures showed.

  Asked if four of the government’s national funds would soon enter the market to buy shares, Chen said the commission “respects professional share managers’ decision to bottom-fish.”

  “A lack of confidence” is the main reason behind the TAIEX’s recent decline, he said.

  Foreign investors yesterday sold a net NT$4.94 billion (US$162.4 million) in local shares and offloaded a net NT$25.3 billion in the last three sessions, data showed.

  But the FSC chairman said foreign investors still showed confidence in the local market, with a European fund telling the commission yesterday that it had received good feedback from investors in Hong Kong and Singapore, who are geared up to buy its funds listed on the TAIEX.

  There were no indications that foreign capital was leaving Taiwan. As of Monday, the net inflow was US$10.7 billion, Chen said.

  He said the impact of the US subprime mortgage crisis on the local market was limited, totaling NT$42.57 billion in losses, less than 0.1 percent of total assets owned by the local banking and insurance sectors.

  To shore up the local market, the government said last month it would encourage insurance companies, which have a total NT$8 trillion in assets, to purchase local shares.

  “Three financial service providers with insurance subsidiaries and two life insurers” will be allowed to buy back shares “within one to two weeks” when their required ratio of risk-based capital is relaxed from the current 300 percent to 250 percent, Chen said yesterday, without elaborating.

  Wu Tang-chieh (吳當傑), head of the commission’s securities and futures bureau, refused to confirm yesterday whether the five financial service companies are Cathay Financial Holding Co (國泰金控), Shin Kong Financial Holding Co ( 新光金控), Fubon Financial Holding Co (富邦金), Taiwan Life Insurance Co (台灣人壽) and China Life Insurance Co (中國人壽保險).

  Local insurance companies have bought NT$14 billion in shares since July 1, Wu said.

  Moreover, since the commission encouraged listed companies to buy back their shares, a total of 90 firms have signaled they intended to do so, which could inject a maximum of NT$30 billion into the TAIEX, he said.
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