Rising overseas exposure and global market turbulence pose risks to the credit profiles of local banks and life insurers, ratings agencies said yesterday.
Taiwanese banks have stepped up lending to China — with total exposure climbing to 62 percent of their net worth as of June this year, from 50 percent in September 2013 — as cross-strait economic and financial ties have increased in recent years, Moody’s said.
“In our view, Taiwanese banks’ ability to assess non-domestic credit and market risks has not yet been tested,” Moody’s analyst Sonny Hsu (徐嵩宜) told a media briefing in Taipei.
Local banks are seeking further loan growth in China and Southeast Asia, driven by heightened competition in the home market that has compressed profit margins, Hsu said.
The increased loans to Chinese companies and Taiwanese businesses in China might expose Taiwanese banks to risks associated with the Chinese economy, including the current slowdown and economic rebalancing, Hsu said.
Export-oriented manufacturers might be most exposed to the slowdown, especially those in the flat-panel display, solar energy and steel sectors, Moody’s said.
Technology companies are also subject to increasing competition from Chinese rivals as the latter move up the value chain, while slowing property sales might create challenging conditions for the real-estate and construction-related sectors, it said.
Taiwan has capped China exposures by local banks to 100 percent of their total shareholders’ equity.
To shore up their credit profile, Taiwanese banks are raising fresh equity while keeping modest asset growth.
Low interest rates and ample liquidity could also help avert a credit crunch and default pressures.
Slower economic growth and unexpected turmoil in the global and local stock markets are increasing earnings volatility for the entire financial sector, particularly for institutions that have built up equity holdings in pursuit of higher returns than interest income.
Against this backdrop, Taiwan-ese life insurers are more sensitive to unexpected market shocks given their relatively weak capitalization and higher equity-based investment leverage than non-life insurers and securities brokers, said Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s.
Taiwan Ratings has no plans to downgrade credit ratings for insurers over the next three months, but it might do so if an insurer’s capitalization weakens due to enlarged losses on equity investments, realized or not, the ratings company said.
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to