Banking sector drops on fears gains are overdone

Stocks fell for the first day in five, led by banks such as China Development Financial Holding Corp (中華開發), on concern their 6.5 percent rally as a group in less than a week already reflects expectations they plan to clean up their balance sheets.

"Banks can only get rid of their bad loans little by little," said Margaret Lin, who manages NT$800 million (US$23.3 million) in stocks at Truswell Securities Investment Trust (富鼎投信) "Some banks won't be able to cut their bad loan rate as fast as expected."

The TAIEX shed 60.37, or 1.1 percent, to 5,669.53 as eight stocks fell for every five that rose. The total value of trade was NT$74.8 billion (US$2.2 billion), almost two-fifths below the six-month daily average of NT$122 billion.

The central bank last week said 11.7 percent of bank lending was non-performing or in danger of default as of March. China Development Financial lost NT$0.60, or 2.7 percent, to NT$22.

Fubon Financial Holding Co (富邦金控), which owns the nation's largest non-life insurer, fell NT$0.30, or 0.9 percent to NT$34.10 after forecasting loss from its coverage of a China Airlines plane that crashed on Saturday will trim 0.9 percent from this year's earnings per share forecast of NT$2.17.

China Airlines, the the nation's biggest carrier, fell NT$1.05, or 6.9 percent, to NT$14.15 on concern its fifth fatal crash in 11 years will cut sales as passengers take rivals' flights and increase insurance premiums. China Airlines' credit rating was cut to "twBBB" by Taiwan Ratings Corp (中華信評).

Ritek Corp (錸德) rose NT$0.30, or 0.9 percent, to NT$33.10 after its shareholders approved a plan to sell 300 million shares overseas to fund expansion. The world's largest maker of recordable compact discs expects rising demand to push disc prices up a 10th in the third quarter, reports said, citing Chairman Yeh Chin-tai.

Taiwan Glass Industrial Corp (臺玻) rose NT$1, or 3.9 percent, to NT$26.80. The nation's largest glass-fabric maker said it will increase prices by 8 percent in June in response to rising demand, boosting its profit margin.