Wed, Aug 09, 2017 - Page 12 News List

Taiwan Ratings expects stable profiles for rest of year

By Crystal Hsu  /  Staff reporter

Taiwanese companies could maintain stable credit profiles for the rest of the year amid a recovering global economy, but foreign exchange risks and souring ties between Taiwan and China are likely to continue, Taiwan Ratings Co (中華信評) said yesterday.

“Local firms may continue to benefit from the improving US economy and stabilizing emerging markets in coming months, but they should remain alert to ongoing credit risks,” credit analyst Anne Kuo (郭彥煒) at the local arm of Standard & Poor’s told a media briefing.

The global ratings service provider last month kept its forecast for Taiwan’s GDP growth unchanged at 2 percent for this year and expects the export-oriented economy to expand by 2.4 percent next year.

Taiwan Ratings regards volatile foreign exchange rates and commodity prices as well as rising competition from China’s technology supply chain as the top risks facing local enterprises.

The New Taiwan dollar gained 6 percent against the greenback between January and June this year, considerably eroding profits at local exporters, as many settle accounts with foreign clients in US dollars, Kuo said.

Foreign exchange rates remain a concern, despite the pace of appreciation in the NT dollar since the second quarter, financial credit analyst Patty Wang (王珮齡) said.

Foreign exchanges also pose a credit challenge to Taiwanese life insurers, as most hold a sizeable amount of assets based in US dollars, Wang said.

Additionally, Taiwanese insurers have a relatively high stake in local shares, rendering their capitalization relatively low, compared with peers in the region, Wang said, adding that banking subsidiaries were financial holding companies’ main profit drivers this year.

Credit analyst Daniel Hsiao (蕭黎明), who is responsible for ratings in the traditional sector, said the business outlook is positive for Taiwanese steel and cement makers after Chinese moves to cut capacity and output to cope with a market glut and stabilize prices.

However, the shipping industry could remain soft, as freight rates are likely to remain volatile, while protectionism overshadows global trade, Hsiao said.

Against this backdrop, Taiwan Ratings expects the central bank to hold interest rates steady this year and embark on a rate hike of 25 basis points next year.

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