Academics and analysts yesterday welcomed an agreement between Taiwan and China to enhance financial cooperation, saying it would benefit the financial and transportation sectors as well as Taiwanese firms based in China.
Envoys from both sides signed a financial cooperation pact in Nanjing, China, yesterday afternoon, paving the way for Taiwanese financial institutions to expand business in the Chinese market.
Wu Chung-shu (吳中書), an economic research fellow at Academia Sinica, said an agreement to enhance bilateral financial cooperation and supervision is positive and favorable for industry growth.
Under the pact, the two sides agreed to work out financial supervision and monetary settlement mechanisms to strengthen commercial ties and financial stability across the Taiwan Strait.
The agreement takes effect immediately and allows regulators on both sides to work on memorandums of understanding (MOUs) regarding financial supervision.
FSC Chairman Sean Chen (陳冲) said earlier this week that the cross-strait financial cooperation pact would pave the way for the signing of MOUs on banking, brokerage, insurance and other financial industries, before the two sides move to open their markets to each other.
Wu said the financial supervision and currency settlement mechanisms could help lenders to decide whether to grant credit when expanding business in China.
Norman Yin (殷乃平), a finance and banking professor at National Chengchih University, praised the agreement as a breakthrough for the financial sector.
Local lenders, long suffering from overbanking in Taiwan, may be allowed to set up branch offices in China and serve Taiwanese customers there.
“The market is full of business potential that domestic banks can take advantage of after legal barriers are removed,” Yin said by telephone. “Their presence can help ease liquidity strain for Taiwanese firms in China. Many have complained about tight credit.”
Yin said Chinese banks would hesitate to make inroads in Taiwan, given the crowded market. He dismissed concern that the agreement could reverse the consolidation of the banking industry, saying the institutions were well aware of the inevitable trend and would heed it if they sought to avoid losses.
The local bourse, however, was not expected to see strong rallies following the signing of the agreement.
Jalin Yang (楊嘉林), a stock analyst at SinoPac Financial Holdings Co (永豐金控), said the agreement would be positive for the financial sector but added that financial share prices shot up as much as 50 percent last week.
“The selling pressure will be high when the TAIEX is close to the 6,000-point level,” Yang said by telephone.
The index stood at 5,880.77 points at the close on Friday.
The quarterly financial performance disclosures from major high-tech firms this week would be more relevant in swaying the stock market, Yang said.
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