Taiwanese life insurers facing pressure to deliver returns are getting a boost from bank bond offerings encouraged by global regulators.
HSBC Holdings PLC sold US$2 billion of notes this week in Taiwan to yield 4 percent under new requirements known as total loss-absorbing capacity (TLAC), which was devised by the cross-border Financial Stability Board to prevent future government bailouts of financial institutions.
That was higher than yields on foreign currency senior securities, which insurers have often purchased, that have fallen as low as 3.35 percent this quarter, according to Bloomberg data.
Taiwanese life insurers had NT$21.2 trillion (US$672.8 billion) in assets as of June 30, a sum bigger than the economic output of Switzerland.
They have been taking a shine to foreign currency assets, with 10-year government bonds at home yielding around a paltry 0.65 percent, and have emerged as dominant buyers of US corporate bonds.
Their holdings of the debt have tripled in four years to US$76 billion, according to Wells Fargo Securities strategists Nathaniel Rosenbaum and George Bory last month.
However, persistent low interest rates around the world started to drag down coupons on debt from international borrowers sold in Taiwan this year.
In contrast, HSBC’s US$2 billion TLAC notes carry a risk premium that makes them attractive to domestic investors, according to Eva Chou (周怡華), an analyst at Standard & Poor’s local subsidiary, Taiwan Ratings Corp (中華信評).
JPMorgan Chase & Co’s US$100 million offering of similar securities in May priced at 4.13 percent.
STAYING AHEAD: Fitch said that TSMC remains technologically ahead of others, but Samsung is building a new chip fab, while China is investing in its domestic industry As escalating US-China tensions and COVID-19-related production disruptions force US technology supply chains to transform, Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) US$12 billion chip fabrication plant in Arizona would be key to spurring greater US production of core semiconductor components, Fitch Ratings said. “We view the US-TSMC alliance as a first step in building a more autonomous US technology supply chain, given high barriers to entry, specifically related to the significant capital and design capability required for leading-edge semiconductor manufacturing,” Fitch said in a statement on Tuesday. “By working with TSMC, US chipmakers will not face the financial burden of incremental investment
DIVERSIFICATION: Although COVID-19 would push more companies to produce in emerging markets, DBS said that it was unlikely that firms would totally leave China Geopolitical tensions and supply disruptions are expected to accelerate the migration of manufacturing out of China, as concerns about the risk of production concentrated in one country increase, S&P Global Ratings said. Although its economic expansion might be weaker than previous levels due to the accelerated relocation of manufacturing, China’s economic growth would still be stronger than that of most other economies, the ratings agency said. “While absolute growth rates will moderate, we believe China’s economic performance will continue to be a key sovereign credit support,” S&P Global Ratings credit analyst Tan Kim Eng (陳錦榮) said in a statement on Thursday. “Its growth
Taiwan’s corporate landscape has changed significantly over the past 20 years, with Hon Hai Precision Industry Co (鴻海精密) replacing Formosa Plastics Corp (台塑) as the revenue leader, while Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) has emerged as the most profitable firm, a survey of Taiwan’s 50 largest companies published on Tuesday last week showed. The Chinese-language CommonWealth Magazine survey ranked Taiwan’s 50 largest companies based on their revenue last year, and compared them with the results of a similar survey it conducted in 2000. Only 33 companies on the original list remained in this year’s rankings, the survey found, following two
GEOPOLITICAL RISKS: Beijing announced plans to strengthen ‘enforcement’ in Hong Kong, sparking losses across Asia led by the Hang Seng’s 5.6 percent plunge Local shares on Friday ended sharply lower amid renewed tensions between the US and China over Chinese telecommunications equipment giant Huawei Technologies Co Ltd (華為) and China’s plan to introduce a national security law in Hong Kong. The TAIEX on Friday finished down 197.16, or 1.79 percent, at 10,811.15 on turnover of NT$177.183 billion (US$5.9 billion), almost flat from a close of 10,814.92 on May 15. The market was down across all major sectors, in particular electronics shares, which finished down 1.99 percent from Thursday’s close. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest wafer foundry and a chip supplier