Wednesday’s passage of a special bill aimed at encouraging the repatriation of funds from abroad is expected to benefit the financial sector, in addition to boosting domestic investment and consumption, analysts said.
Based on research conducted by analysts at KGI Securities Investment Advisory Co (凱基投顧) and Yuanta Securities Investment Consulting Co (元大投顧), repatriated funds would boost wealth management business at banks, while the lower tax rates for such funds would accelerate the pace of money flows and form a substantial support for the stock market, based on US experience.
The bill would result in an average of about NT$483.7 billion (US$15.55 billion) in funds flowing into Taiwan, which is forecast to generate NT$2.9 billion in wealth management fee income per year and about 1 percent earnings contribution to all banks, KGI said.
The Ministry of Finance has estimated capital inflows of NT$130 billion to NT$890 billion a year after the new law takes effect later this year, KGI said.
“The implementation of the special bill is expected to benefit banks’ wealth management business and deposit growth during 2020-2021, but the actual earnings contribution would depend on the size of funds repatriated,” KGI analyst Eric Shih (施志鴻) wrote in a note on Thursday.
CTBC Bank (中信銀行) is likely to be the main beneficiary of the capital repatriation by businesses and individuals, as it leads its peers with an 18 percent market share in the domestic wealth management business, Shih wrote.
Other beneficiaries might include Cathay United Bank (國泰世華銀行), Taipei Fubon Commercial Bank (台北富邦銀行), E.Sun Commercial Bank (玉山銀行) and Taishin International Bank (台新銀行), as they can provide tax planning and financial investment advice for wealthy individuals or businesses, he said.
CTBC Bank and E.Sun Bank, as well as state-run Mega International Commercial Bank (兆豐銀行), would likely be the main banks for parking such funds and would benefit from a potential increase in wealth management fee income, Yuanta analyst Vincent Chen (陳豊丰) said in a note issued on Thursday.
The returning funds would also be a catalyst to owners of land, manufacturing plants or rental offices, as well as stimulating domestic consumption ranging from food/beverage making, retailing to transportation, Chen wrote.
“Although the outlook for the tech sector remains uncertain, domestic-oriented bank, consumption, property, capital expenditure and high dividend yield stocks should see re-ratings,” Chen wrote.
“With the US potentially leading a global interest rate cut, the TAIEX’s fifth-highest yield globally will be even more appealing. Therefore, we edge up our TAIEX target from 11,000 to 11,300,” he added.
The TAIEX on Friday closed at 10,785.73 points, up 0.5 percent for the week compared with its close on June 28.
The lower tax rates for repatriated funds promised by the new law could also boost local equities, KGI analyst Jeff Chang (張明祥) said, citing the implementation of the US Tax Cuts and Jobs Act, which resulted in a surge in share buybacks and supported US equities last year.
Taiwanese invested US$318.2 billion abroad last year, or NT$10 trillion in local dollar terms, Chang said, citing the Investment Commission’s tallies.
If 10 to 30 percent of that money is remitted home, and a percentage forwarded to equity investment, it would inject anywhere from NT$300 billion to NT$900 billion into the stock market, he said.
That would benefit assets and industrial automation players as well as blue-chip stocks known for offering stable dividend payout and high dividend yield, Chang added.
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