TAIEX surges to 18-month high, led by financials

Taiwan's TWSE Index rose to an 18-month high, led by Hua Nan Financial Holdings Co (華南金控), as the nation's lenders start selling bad loans to clean up their balance sheets.

The index added 60.91, or 1 percent, to 6,448.12, the highest close since Sept. 28, 2000, as 331 shares gained and 171 fell. The banking and insurance index soared 5.3 percent to 850.24.

The total value of trade was NT$122.5 billion (US$3.5 billion), above the six-month daily average of NT$119 billion.

Hua Nan, which said it may sell bonds to help finance a possible write-off of more than NT$50 billion (US$1.4 billion) of bad loans by June, rallied NT$1.60, or 6.7 percent, to NT$25.40.

"Banks' earnings will improve next year if they write off bad debts now," said Margaret Lin, who manages NT$800 (US$23 million) in stocks at Truswell Securities Investment Trust Co (富鼎投信).

"We're buying the shares for the future, not for now."

For the week, the index rose 4.2 percent, the largest gain in eight weeks.

AU Optronics Corp (友達光電) rose NT$0.50, or 0.9 percent, to NT$53.50. The world's third-largest flat-panel display maker posted a NT$2 billion profit in the first quarter, from a NT$1.1 billion loss a year ago.

China Steel Corp (中鋼) rose NT$0.40, or 2.3 percent, to NT$17.50. Taiwan's largest steelmaker said first-quarter profit before tax dropped 29 percent from a year ago to NT$1.6 billion.

First Commercial Bank (第一銀行) rose NT$0.60, or 2.1 percent, to NT$28.70. Taiwan's largest publicly traded lender by assets said it will sell US$131 million of its overseas bad loans to a unit of Lehman Brothers Holdings Inc as the bank moves to clean up its loan book.

Hon Hai Precision Industry Co (鴻海精密), which makes mobile-phone parts for Nokia, fell NT$4, or 2.5 percent, to NT$157. Nokia cut its sales forecast for this year because of slowing demand for cellular phones and plans to cut jobs in the US to cut costs.

Nan Ya Plastic Corp (南亞塑膠) fell NT$0.10, or 0.3 percent, to NT$37.50. The unit of Taiwan's largest petrochemical maker, Formosa Group, said unaudited first-quarter profit almost doubled from a year ago to NT$4.7 billion as a recovery in the plastics and electronics industry boosted sales, a Chinese-language newspaper reported, citing the company.

Quanta Computer Inc (廣達電腦) rose NT$2.50, or 2.1 percent, to NT$123. Taiwan's largest notebook-computer maker won an order to start making computers for Japan's NEC Corp, Chinese-language media reported. Currently, Arima Computer Corp (華宇電腦) and First International Computer Inc (大眾電腦) make notebook computers for NEC.

United World Chinese Commercial Bank (世華銀行) rose NT$1.60, or 7 percent, to NT$24.50. Taiwan's eighth-largest publicly traded lender by assets plans to sell as much as NT$10 billion of debt this year to help fund bad-loan write-offs.