Taiwanese banks and life insurance companies should watch out for higher economic risks associated with ASEAN markets as they seek to expand the scale of their businesses and diversify revenue sources abroad, Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor’s (S&P) Ratings Services, said yesterday.
They should undertake acquisition attempts with share swaps rather than cash to avoid depleting capital reserves, Taiwan Ratings said.
The nation’s financial institutions are preparing to expand in the Asia-Pacific region, as they are being encouraged by financial regulators to improve scale advantages and aim for business diversification gains, Taiwan Ratings analyst Andy Chang (張書評) told a media briefing.
Domestic banks and insurers have sufficient capital and assets of high enough quality for expansion overseas — enabling them to pursue higher yields, as excessive competition in the domestic market has squeezed profit margins, he said.
Their relatively smaller scales and lack of business diversification is why the nation’s lenders mostly have a higher noninterest expense to operating revenue ratio compared with their peers in the region, Chang said.
“The more branches a bank owns, the lower the overall costs of software, hardware and other spending,” Chang said. “A larger presence in overseas markets also helps cushion headwinds hitting a specific area.”
Significant overseas exposure allows regional players like DBS Bank Ltd to take advantage of economic growth in emerging Asian markets, even as growth slows in its domestic market of Singapore, he said.
Mega International Commercial Bank (兆豐國際商銀), the banking arm of Mega Financial Holding Co (兆豐金控), has an advantage over its domestic peers due to its higher presence overseas, therefore it is able to keep operating costs on a par with leading the region’s leading financial institutions, he said.
ASEAN offers attractive markets for Taiwanese financial institutions, because an increasing number of Taiwanese firms have moved their businesses there, Taiwan Ratings said.
Economic risks are higher in ASEAN countries including Thailand Malaysia and Vietnam, and so are nonperforming assets as can be seen from the balance sheets of banks in the region, the agency said.
Acquisition deals funded by cash can result in weakened capitalization unless the deal is made through a share swap, Chang said.
Foreign exchange risks are another challenge the nation’s financial institutions have had to overcome when expanding overseas, Taiwan Ratings said.
Taiwanese insurers keep higher equity holdings and foreign currency-based assets than regional peers due to a lack of investment tools in Taiwan, the agency said.
Drastic volatility in global financial markets this year has driven up hedging costs and equity investment losses, increasing the difficulty the nation’s insurers face in making profits, Chang said.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last