Mon, Aug 08, 2011 - Page 12 News List

FSC, central bank urge calm S&P cuts ‘AAA’ rating of US

By Kevin Chen  /  Staff Reporter

The Financial Supervisory Commission (FSC) yesterday urged investors to remain calm after the TAIEX plunged and Standard & Poor’s (S&P) downgraded the US’ credit rating last week, citing good business performances from listed companies.

The central bank yesterday also asked investors not to panic over the US credit downgrade, saying the S&P’s credit rating was subjective.

In a statement issued yesterday, the FSC said listed companies reported a total NT$1.64 trillion (US$56.59 billion) in revenue last month, up 2.88 percent from the previous month.

In the first half of this year, accumulated revenue from listed companies totaled NT$8.48 trillion, up 4 percent from a year earlier, the statement said.

In an attempt to reassure investors that local stock markets remain stable, the FSC said both margin trading and short selling have as yet shown no warning signs.

Based on the commission’s latest data, margin loans dropped by NT$13.1 billion to NT$263.5 billion on Friday from NT$276.6 billion on Monday last week, while the collateral maintenance ratio for margin trading remained at 148.54 percent, relatively safe from the regulatory threshold of 120 percent and posing no immediate threat of margin calls.

In addition, short sales of NT$2.4 billion worth of stocks on Friday accounted for merely 1.5 percent of the NT$162.6 billion overall transactions on that day, and that ratio was not much different from an average 1.53 percent since the beginning of the year, the commission said.

The central bank also issued a statement yesterday to remind the public that ratings issued by the credit rating agencies — be it S&P, Moody’s or Fitch — were only for reference and investors should not be overly reliant on these ratings reports.

“Take Spain as an example. The country has been offered a rating higher than Taiwan, Japan and China, indicating that ratings agencies’ reports are subjective and cannot truly reflect a country’s actual scale of economy, nor the depth of a country’s financial market and its debt capacity,” the bank said.

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