The benchmark TAIEX yesterday plunged to its lowest level since September 2006, led by a sell-off of financial stocks as investors grew nervous about local financial institutions’ combined exposure of more than NT$600 billion (US$19.74 billion) to US mortgage lenders Fannie Mae and Freddie Mac.
The index ended 322.72 points, or 4.51 percent, lower at 6,834.24, the lowest close in the past 22 months. Turnover was NT$107.516 billion in yesterday’s session, an increase of 13 percent from the previous day’s NT$94.871 billion, the Taiwan Stock Exchange’s tallies showed.
The TAIEX’s Banking and Insurance sub-index closed 5.8 percent lower in yesterday’s trading, led by a 6.97 percent drop in Cathay Financial Holding Co (國泰金控) to NT$58.7. Shin Kong Financial Holding Co (新光金控) and Fubon Financial Holding Co (富邦金控) were also limit-down to NT$17.8 and NT$25 respectively, the stock exchange’s data showed.
The Financial Supervisory Commission (FSC) yesterday urged investors to remain calm, saying that domestic financial and insurance companies would only suffer limited losses from their securities investments issued by Freddie Mac and Fannie Mae, which total NT$616.371 billion.
“Investors shouldn’t worry unnecessarily since it is almost certain that the US government won’t allow these two companies to fail,” FSC Vice Chairwoman Lee Jih-chu (李紀珠) said yesterday.
She also said that the problems the two mortgage firms have encountered are nothing like the subprime mortgage crisis.
She also said that the local financial institutions’ investments in free-falling shares of Freddie Mac and Fannie Mae only took up 0.1 percent of their total investment.
Huang Tien-mu (黃天牧), director of the commission’s insurance bureau, said the nation’s insurance sector had incurred the worst losses of NT$489 million as of the end of last month, out of NT$840 million in shares for these two companies.
The insurance sector, however, expects no losses from its NT$489.6 billion long-term mortgage-backed securities (MBSs) issued by Freddie Mac and Fannie Mae, Huang said.
Domestic insurance companies also invested NT$45 billion in corporate bonds, which aren’t expected to suffer losses, that were issued by the two US mortgage firms, Huang said.
In total, the insurance sector has the biggest investment — NT$535.6 billion in the two companies.
Lee reiterated that there are no signs that ratings on MBSs or bonds issued by the two US companies would be downgraded soon, which she said provided a confidence boost to domestic companies’ US investment prospects.
“The two companies’ financial problems should have a limited impact on the local financial sector,” she said.
Wu Tang-chieh (吳當傑), director-general of the FSC’s Securities and Futures Bureau, said that domestic investment trusts have only suffered NT$880,000 in losses from their US$40 million in MBS-related investments as of early last month.
Director-general of the FSC’s banking bureau Chang Ming-daw (張明道) said that domestic banks have invested NT$77.2 billion in MBSs issued by the two US companies and another NT$2.2 billion in their bonds as of last Friday, which he said should incur limited losses.
Also See: Asian stocks plunge on US woes
Also See: Cathay tops links to ailing US firms
FREEDOM OF NAVIGATION: The UK would continue to reinforce ties with Taiwan ‘in a wide range of areas’ as a part of a ‘strong unofficial relationship,’ a paper said The UK plans to conduct more freedom of navigation operations in the Taiwan Strait and the South China Sea, British Secretary of State for Foreign, Commonwealth and Development Affairs David Lammy told the British House of Commons on Tuesday. British Member of Parliament Desmond Swayne said that the Royal Navy’s HMS Spey had passed through the Taiwan Strait “in pursuit of vital international freedom of navigation in the South China Sea.” Swayne asked Lammy whether he agreed that it was “proper and lawful” to do so, and if the UK would continue to carry out similar operations. Lammy replied “yes” to both questions. The
‘OF COURSE A COUNTRY’: The president outlined that Taiwan has all the necessary features of a nation, including citizens, land, government and sovereignty President William Lai (賴清德) discussed the meaning of “nation” during a speech in New Taipei City last night, emphasizing that Taiwan is a country as he condemned China’s misinterpretation of UN Resolution 2758. The speech was the first in a series of 10 that Lai is scheduled to give across Taiwan. It is the responsibility of Taiwanese citizens to stand united to defend their national sovereignty, democracy, liberty, way of life and the future of the next generation, Lai said. This is the most important legacy the people of this era could pass on to future generations, he said. Lai went on to discuss
AMENDMENT: Climate change is expected to increase the frequency of high-temperature days, affecting economic productivity and public health, experts said The Central Weather Administration (CWA) is considering amending the Meteorological Act (氣象法) to classify “high temperatures” as “hazardous weather,” providing a legal basis for work or school closures due to extreme heat. CWA Administrator Lu Kuo-chen (呂國臣) yesterday said the agency plans to submit the proposed amendments to the Executive Yuan for review in the fourth quarter this year. The CWA has been monitoring high-temperature trends for an extended period, and the agency contributes scientific data to the recently established High Temperature Response Alliance led by the Ministry of Environment, Lu said. The data include temperature, humidity, radiation intensity and ambient wind,
SECOND SPEECH: All political parties should work together to defend democracy, protect Taiwan and resist the CCP, despite their differences, the president said President William Lai (賴清德) yesterday discussed how pro-Taiwan and pro-Republic of China (ROC) groups can agree to maintain solidarity on the issue of protecting Taiwan and resisting the Chinese Communist Party (CCP). The talk, delivered last night at Taoyuan’s Hakka Youth Association, was the second in a series of 10 that Lai is scheduled to give across Taiwan. Citing Taiwanese democracy pioneer Chiang Wei-shui’s (蔣渭水) slogan that solidarity brings strength, Lai said it was a call for political parties to find consensus amid disagreements on behalf of bettering the nation. All political parties should work together to defend democracy, protect Taiwan and resist
RSS