The Financial Supervisory Commission is considering policies to protect local insurance companies from difficulties with investment planning as bond issuers exercise options to pay off debt early.
Foreign issuers that sold callable notes in Taiwan have rushed to repay the securities before maturity to lock in lower financing costs. Life insurers face risks if issuers pay off bonds before maturity, Insurance Bureau Deputy Directory-General Shih Chiung-hwa (施瓊華) said in a telephone interview on Wednesday.
The commission has yet to make any decision on a new policy, and is in talks with life insurers concerning the risks, Shih said.
About US$6.7 billion of foreign-currency notes sold by international borrowers in Taiwan were repaid this year ahead of maturity, including those sold by Verizon Communications Inc, Goldman Sachs Group Inc, Morgan Stanley and Citigroup Inc.
That is up from US$2.1 billion for all of last year.
The trend is fueling debate about securities that can be redeemed early, with some brokerages saying the ability to sell debt with shorter-term call dates helps attract issuers to Taiwan. Some life insurance firms have focused more on potential losses.
About 80 percent of longer-tenor international bonds sold by foreign issuers in Taiwan are callable notes, according to Sunny Hsu (徐順鋆), vice president at Shin Kong Life Insurance Co (新光人壽).
If issuers repay the securities before the original maturity, investors will lose future coupons and the repayment might not be reinvested at as high an interest rate as when the note was initially purchased. Longer non-callable securities might help eliminate such risks.
“There should be a policy limiting issuers from buying back notes within three to five years,” Hsu said. “This could lower the period mismatch between the insurance policy payout and bond payment income.”
However, stripping borrowers of the ability to issue bonds callable in the short-term would lead to higher issuance costs and companies could opt to take their offerings elsewhere, said Alvin Yang (楊宗威), executive vice president at KGI Securities Co (凱基證券).
“It is not like Taiwan is the most popular place to issue bonds to begin with,” Yang said. “It is with overall low cost of deals and callability that we have been able to attract more deals.”
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