Major financial holding companies voiced pessimism about earnings outlook in the second half of the year as global uncertainty continues to weigh on financial markets.
Tsai Hong-tu (蔡宏圖), chairman of Cathay Financial Holding Co (國泰金控), the nation’s largest financial service provider by assets, said the company would take a cautious approach and stay away from unfamiliar investments.
“It will take Europe a long time to resolve its fiscal debt problems, which will weigh on the global economy in the second half [of this year] and through the whole of next year,” Tsai told the firm’s annual shareholders’ meeting.
Global central banks have embarked on an easing monetary cycle to stimulate economic growth, making it more difficult to post gains from overseas investments, he said.
Cathay Life Insurance Co (國泰人壽), the conglomerate’s insurance arm, had 36.2 percent and 4.3 percent of its NT$3.08 trillion fund invested in foreign funds and equities respectively as of March 31, company data show.
“We will continue to focus on foreign government and company bonds and shun unfamiliar, risky investments” lest they incur the huge trading losses that befell JPMorgan in March, Tsai said.
Cathay Financial shareholders approved a cash dividend of NT$0.50 and a stock dividend of 5 percent, based on last year’s net income of NT$11.1 billion, or earnings per share of NT$1.08.
Fubon Financial Holding Co (富邦金控), the nation’s second-largest but most profitable financial group, shared Cathay’s dim view and urged the government to drop its capital gains tax proposal, saying it would hurt local capital markets.
“I object to the plan to tax capital gains on stock investments, because few countries in the world levy both securities transactions and [capital] gains [taxes],” Fubon Financial chairman Daniel Tsai (蔡明忠) told reporters after the shareholders’ meeting.
The proposal is hurting the local bourse, as evidenced by the light trading volume over the past three months, he said.
It is adding pressure to the nation’s export-reliant economy after China, Taiwan’s largest trading partner, cut its GDP growth target below 8 percent for this year, Daniel Tsai said.
He voiced his support for a floating rate for the securities transaction tax, under which the current levy of 0.3 percent would be lowered when the TAIEX drops below a certain level.
He added that the government should not seek to tighten real-estate investments, which he said was a result of excess liquidity and low interest rates.
“It is natural for funds to flow to properties when time deposits generate little interest income,” he said.
Fubon Financial shareholders approved a cash dividend of NT$1 and a stock dividend of 5 percent, based on profits of NT$30.54 billion last year.