Taiwanese banks are expected to outperform insurers next year, as their earnings are less susceptible to the impacts of recent monetary policy changes, analysts said.
The central bank on Thursday lowered policy interest rates by 12.5 basis points for the second time in three months, just a day after the US Federal Reserve announced that it was hiking rates by 25 basis points.
Credit Suisse AG listed E.Sun Financial Holding Co (玉山金控) as its top long play for next year, and life insurance-heavy Fubon Financial Holding Co (富邦金控) as its top short play.
It is upbeat on E.Sun Financial’s strong fee income earnings, which are expected to sustain a growth momentum at two to three times of its peers, on the back of its wealth management unit.
E.Sun Financial’s earnings should also be boosted by declining operating expenses, a Credit Suisse report said.
With its tier 1 ratio above 9 percent and group leverage ratio among the lowest in the sector, E.Sun’s capital position can support growth for the next two to three years, the report said.
A Tier 1 capital ratio measures a bank’s financial strength based on the sum of its core equity capital and total risk-weighted assets.
The report said that earnings by Fubon Life Insurance Co (富邦人壽), the primary life insurance subsidiary of Fubon Financial, would be very vulnerable to a rise in US interest rates.
The positioning of Fubon Life’s investment portfolio and products have mostly been geared toward sustained low interest rates. As a result, its investment book value fell by NT$74 billion (US$2.23 billion at current exchange rates) in the six month period ending in the third quarter because of market-to-market losses.
This caused the double leverage ratio of the holding company sequentially to rise by 8 percent to 121 percent in the third quarter.
Industry watchers have said the lower the double leverage reading, the better a company’s capital strength, as it indicates the firm’s lower risk in financing assets with debt and other liabilities.
Yuanta Securities Investment Consulting Co (元大投顧) analyst Peggy Shih (施姵帆) named E.Sun Financial as her firm’s top pick in a report published on Thursday.
She cited its large fee income contribution, which is estimated at about 35 percent of total net revenue.
Following the central bank’s two rate cuts this year, Shih is expecting Taiwan’s 10-year bond yield to fall 50 basis points from a high of 1.65 percent in the first half to 1.17 percent, which would strain domestic insurers’ recurring income yields.
Domestic insurers usually allocate up to 40 percent of assets to domestic bonds, cash and mortgage loans, which are susceptible to central bank moves, she said.
“Insurers might suffer up to a 5 percent decrease in their earnings-per-share performance next year as a result of the rate cut, and their liability reserve is also likely to increase, given lower discount rates from now on,” Shih said.
SECOND-RATE: Models distilled from US products do not perform the same as the original and undo measures that ensure the systems are neutral, the US’ cable said The US Department of State has ordered a global push to bring attention to what it said are widespread efforts by Chinese companies, including artificial intelligence (AI) start-up DeepSeek (深度求索), to steal intellectual property from US AI labs, according to a diplomatic cable. The cable, dated Friday and sent to diplomatic and consular posts around the world, instructs diplomatic staff to speak to their foreign counterparts about “concerns over adversaries’ extraction and distillation of US AI models.” Distillation is the process of training smaller AI models using output from larger, more expensive ones to lower the costs of training a powerful new
Micron Technology Inc is a driving force pushing the US Congress to pass legislation that would put new export restrictions on equipment its Chinese competitors use to make their chips, according to people familiar with the matter. A US House of Representatives panel yesterday was to vote on the “MATCH Act,” a bill designed to close gaps in restrictions on chipmaking equipment. It would also pressure foreign companies that sell equipment to Chinese chipmaking facilities to align with export curbs on US companies like Lam Research Corp and Applied Materials Inc. The bill targets facilities operated by China’s ChangXin Memory Technologies Inc
Singapore-based ride-hailing and delivery giant Grab Holdings’ planned acquisition of Foodpanda’s Taiwan operations has yet to enter the formal review stage, as regulators await supplementary documents, the Fair Trade Commission (FTC) said yesterday. Acting FTC Chairman Chen Chih-min (陳志民) told the legislature’s Economics Committee that although Grab submitted its application on March 27, the case has not been officially accepted because required materials remain incomplete. Once the filing is finalized, the FTC would launch a formal probe into the deal, focusing on issues such as cross-shareholding and potential restrictions on market competition, Chen told lawmakers. Grab last month announced that it would acquire
The artificial intelligence (AI) boom has triggered a seismic reshuffling of global equity markets, with Taiwan and South Korea muscling past European nations one by one. With its stock market now valued at nearly US$4.3 trillion, Taiwan surpassed the UK, Europe’s biggest market, earlier this month, data compiled by Bloomberg showed. South Korea is about US$140 billion away from doing the same. The tech-heavy Asian markets have shot past Germany and France in the past seven months. The shift is largely down to massive gains in shares of three companies that provide essential hardware for AI: Taiwan Semiconductor Manufacturing Co (TSMC, 台積電),
RSS