Financial stocks rose yesterday amid expectations that Taiwan’s central bank would raise its key interest rates once the US Federal Reserve starts tapering its bond-buying stimulus program.
However, property shares fell as investors started worrying that a potential rate hike might harm sentiment in the domestic real-estate market.
Such divergent reactions from the two sectors came after the central bank on Thursday left its policy rates unchanged for the ninth consecutive quarter, but central bank Governor Perng Fai-nan (彭淮南) said at a press conference after the the quarterly policymaking meeting that people should not expect interest rates to stay low forever.
Perng’s remarks raised speculation that the central bank might begin a monetary normalization process later this year or early next year, pushing the financial and insurance sub-index on the main bourse, which reflects the general performance of shares in the financial sector, to rise 0.75 percent, compared with an increase of 0.56 percent on the benchmark TAIEX.
The building materials and construction stock index — a gauge of the nation’s property sector — fell 1.87 percent yesterday, Taiwan Stock Exchange data showed.
Jihsun Securities Co (日盛證券) analyst Leon Chu (褚國廷) said the economy remains too weak to justify an interest rate hike by the central bank in the coming three months amidst benign inflation, while Fubon Securities Co (富邦證券) researcher Kristin Chen (陳韻婷) said the odds on the central bank raising rates by the first quarter of next year are small given the Fed’s no-tapering announcement last week, according to their separate research notes.
Yuanta Securities Corp (元大證券) also predicted the central bank would raise interest rates in the second half of next year and said that financial institutions, including banks and insurance companies, would be the beneficiaries of the move.
Among financial stocks, Taiwan Life Insurance Co (台灣人壽) surged 3.93 percent and Mega Financial Holding Co (兆豐金控) closed up 1.65 percent. Cathay Financial Holding Co (國泰金控) gained 1.19 percent and CTBC Financial Holding Co (中信金控) moved up 1.55 percent.
However, the central bank on Thursday highlighted its cautious sentiment toward domestic household finances and Perng said home buyers should be vigilant about their ability to repay mortgage loans, which scared investors off property shares in the face of a possible uptrend in interest rates.
In the property sector, Kindom Construction Corp (冠德建設) fell by the daily maximum of 7 percent, Highwealth Construction Corp (興富發建設) shed 3.18 percent and Huaku Development Co (華固建設) dropped 1.24 percent.
Even though the central bank did not introduce new credit control measures for the housing market on Thursday, Taishin Securities Investment Advisory Co (台新投顧) said long-term the property market faces growing headwinds and kept a cautious view of the sector.
“Taiwan’s aging population, unfavorable government policies and the central bank’s potential rate adjustments are threatening the property sector’s long term development,” Taishin analyst Chen Yi-hsiu (陳怡秀) said in a separate note.
Based on the latest available data from the central bank, the average mortgage rate among the nation’s five biggest state-run lenders — Bank of Taiwan (台灣銀行), Land Bank of Taiwan (土地銀行), Taiwan Cooperative Bank (合作金庫銀行), Hua Nan Commercial Bank (華南銀行) and First Commercial Bank (第一銀行) — was about 1.95 percent last month.
If mortgage rates rise to 3 percent, they will start to have a material impact on borrowers as well as the property market, Chen said.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by