Taiwan’s life insurers have refrained from aggressively building up their reserve to protect against foreign exchange volatility introduced in March last year, reflecting limited desires and flexibility to alter hedging strategies, according to Taiwan Ratings Corp (中華信評), Standard & Poor’s local arm.
The reserve pool accounts for a mere 0.38 percent of domestic life insurers’ overseas investments as of September last year, down from 0.5 percent in March the same year, when they were first allowed to set aside the fund, the ratings agency said.
“Until the fund grows substantially, it can provide only marginal support to insurers’ bottom lines,” Taiwan Ratings’ credit analyst Patty Wang (王珮齡) said, attributing the drop in reserves to rapid growth in overseas investments.
The reserve fund is intended to counter the negative impact of severe foreign exchange fluctuations on their assets.
The slow build-up of reserves indicates that domestic life insurers may keep their prudent hedging strategies unchanged in the coming one to two years, Wang said, adding that they are generally exposed to higher foreign exchange risks than regional peers because of their large overseas exposure and higher rate of currency-mismatch problems.
“We don’t expect the pool to expand rapidly in the near future unless insurers are willing to sacrifice their earnings to make additional provisions,” Wang said.
The small reserve pool restricts hedging flexibility and life insurers are unlikely to lower their hedged positions drastically to save hedging costs in the absence of a strong foreign exchange buffer, Wang said.
Life insurers would have to substantially increase their foreign exchange reserves if they want to more effectively cushion against foreign exchange losses, Wang said.
Consequently, the use of the reserve may not trigger rating actions in the coming one to two years even though drastic changes in foreign exchange risk-taking behavior will impact credit profiles, Taiwan Ratings said.
The agency has assigned a negative rating outlook on local life insurers because of the sector’s volatile capitalization and lower earnings in comparison with Asian peers.
CAUTIOUS RECOVERY: While the manufacturing sector returned to growth amid the US-China trade truce, firms remain wary as uncertainty clouds the outlook, the CIER said The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction. “Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference. The full impact of US tariff decisions is unlikely to become clear until later this month
Popular vape brands such as Geek Bar might get more expensive in the US — if you can find them at all. Shipments of vapes from China to the US ground to a near halt last month from a year ago, official data showed, hit by US President Donald Trump’s tariffs and a crackdown on unauthorized e-cigarettes in the world’s biggest market for smoking alternatives. That includes Geek Bar, a brand of flavored vapes that is not authorized to sell in the US, but which had been widely available due to porous import controls. One retailer, who asked not to be named, because
CHIP DUTIES: TSMC said it voiced its concerns to Washington about tariffs, telling the US commerce department that it wants ‘fair treatment’ to protect its competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reiterated robust business prospects for this year as strong artificial intelligence (AI) chip demand from Nvidia Corp and other customers would absorb the impacts of US tariffs. “The impact of tariffs would be indirect, as the custom tax is the importers’ responsibility, not the exporters,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) said at the chipmaker’s annual shareholders’ meeting in Hsinchu City. TSMC’s business could be affected if people become reluctant to buy electronics due to inflated prices, Wei said. In addition, the chipmaker has voiced its concern to the US Department of Commerce
Real estate agent and property developer JSL Construction & Development Co (愛山林) led the average compensation rankings among companies listed on the Taiwan Stock Exchange (TWSE) last year, while contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) finished 14th. JSL Construction paid its employees total average compensation of NT$4.78 million (US$159,701), down 13.5 percent from a year earlier, but still ahead of the most profitable listed tech giants, including TSMC, TWSE data showed. Last year, the average compensation (which includes salary, overtime, bonuses and allowances) paid by TSMC rose 21.6 percent to reach about NT$3.33 million, lifting its ranking by 10 notches
RSS