Pact’s delay hits financial-sector shares

NO FINALITY::Investors are shunning financial and insurance companies’ shares because the cross-strait service trade pact has not been ratified yet, analysts said

By Crystal Hsu  /  Staff reporter

Wed, Mar 12, 2014 - Page 13

Amid uncertainty ahead of the legislature’s review of the cross-strait service trade agreement today, analysts said the situation is unfavorable for banks and securities houses that seek to expand in China.

Shares in financial and insurance companies shed 1.5 percent in the past month, while the TAIEX gained 3.22 percent.

So far this year, the sector’s shares have dipped 5.29 percent, compared with the broader market’s 1 percent rise, partly because of the government’s plan to raise the business tax on banks and life insurers from 2 percent to 5 percent.

“Investors are likely to stay cautious about financial stocks for a while, as opposition lawmakers have insisted on reviewing the pact clause by clause, raising uncertainty over its fate,” Masterlink Securities Investment Advisory Corp (元富投顧) president Liu Kun-hsi (劉坤錫) said by telephone.

The agreement has been languishing in the legislature since June last year, where lawmakers intend to scrutinize the pact and decide whether to pass it.

Any change to the signed agreement would force both sides of the Taiwan Strait to restart negotiations — which opponents of the plan have called for repeatedly.

The agreement has met with criticism from legislators and some service sector businesses, who fear that Chinese business juggernauts with deep pockets will overrun Taiwan’s smaller operators.

Critics have also raised concerns about a potential influx of Chinese workers into Taiwan.

Hoping to alleviate the doubts and build consensus on the issue, the legislature has held a series of 16 hearings on the agreement since September last year. The last public hearing was held on Monday.

Liu said the pact is an important part of local financial firms’ efforts to establish joint ventures with Chinese partners and introduce Chinese capital for future expansion.

Yuanta Securities Co (元大寶來證券) and SinoPac Securities Co (永豐金證券) plan to partner with Chinese companies to form a brokerage in Shenzhen and China’s Fujian Province respectively, while Bank SinoPac (永豐銀行) has inked a deal to sell 20 percent of its shares to the Industrial and Commercial Bank of China (中國工商銀行) via a private placement and the arrangement is due to expire next month.

Hua Nan Securities aims to set up a brokerage in Shenzhen as parent company Hua Nan Financial Holding Co (華南金控) is endeavoring to diversify its source of income.

If ratification of the service pact drags on, Taiwanese firms may increasingly lose their competitive edge as their peers in Hong Kong and other areas are also eyeing the Chinese market, Liu said.

State-run Hua Nan Securities Co (華南永昌投顧) chairman David Chu (儲祥生) said financial shares would continue to underperform because the service agreement looks unlikely to clear the legislature anytime soon.

Opposition Democratic Progressive Party lawmakers yesterday disclosed a poll showing that 53 percent of the public had misgivings about the agreement and more than 60 percent supported a detailed scrutiny.

Additional reporting by CNA