Worries over problematic lenders cause stocks to dip

Taiwan stocks fell, led by lenders such as First Commercial Bank (第一銀行), after a report raised concern the government won't save problematic banks from collapsing.

Banks that fail to improve their operations will have to exit the industry, the local Chinese-language media reported, citing Minister of Finance Lee Yung-san (李庸三).

Taiwan wants to destroy the myth that banks can't go out of business, Lee said in the report.

The TAIEX fell 104.57, or 1.8 percent, to 5571.08. In the past three months, the index has dropped 0.4 percent compared with the bank and insurance subindex's 13.8 rally, which was driven by optimism that lenders' earnings will increase after they write off bad loans.

"The report could be an excuse to sell bank stocks as their valuations have become unreasonable," said Lin Kuan-ho, who helps to manage NT$1.7 billion (US$49.8 million) in stocks at First Global Investment Trust Co (元大證券投信).

First Commercial Bank, which has a non-performing loan ratio of about 8.2 percent and forecasts a NT$28 billion loss this year, fell NT$1.70, or 6.9 percent to NT$23.10.

Within the index, about 10 stocks fell for every one that rose. The total value of trade was NT$48.4 billion (US$1.4 billion), the lowest since Oct. 23, and three-fifths below the six-month daily average of NT$121 billion.

AU Optronics Corp (友達光電), the world's No. 3 flat-panel-display maker, fell NT$1.70, or 3.8 percent, to NT$42.90.

South Korea's Samsung Electronics Co said supply of 17-inch flat-panel display screens may exceed demand in the second half of the year as rivals boost production, the local Chinese-language media reported.

Samsung Electronics plans to cut its prices for the screens to increase its market share, the paper reported.

Amtran Technology Co (瑞軒科技) fell NT$2, or 3.2 percent, to NT$60.50. The computer-monitor maker sold US$80 million of overseas bonds convertible into shares to cut interest payment costs and reduce the risk of currency fluctuations.

Citicorp International Ltd has the option to sell a further US$10 million of the bonds.

Everlight Electronics Co (億光電子) rose NT$0.20, or 0.6 percent, to NT$33.20. The maker of light emitting diodes posted record sales of NT$350 million in May, almost three-fifths higher than a year ago.

King Yuan Electronics Co (京元電子) fell NT$1.40, or 6.6 percent, to NT$19.90. The Securities and Futures Commission plans to bring a civil suit and seek compensation from the tester of semiconductors after the company cut its forecast last year beyond the range permitted. King Yuan turned to a NT$791.7 million loss last year, after forecasting in March a NT$1.87 billion profit.

Micro-Star International Co (微星) rose NT$1.50, or 1.1 percent, to NT$135.50 after rival Acer Inc hired the computer maker to make its new line of desktop computers to cut costs.

Nanya Technology Corp (南亞科技) fell NT$0.70, or 2.2 percent, to NT$31.30. Taiwan's largest computer-memory-chip maker by market value scrapped an application to sell 433 million shares overseas, saying it wants more time for the market to improve. It said it plans to submit a new application this week.

Visual Photonics Epitaxy Co (全新光電), which makes parts for semiconductors for customers such as Conexant Systems Inc, rose NT$1.70, or 5.9 percent, to NT$30.30 after the company forecast sales in May will rise by more than half from NT$20.3 million the previous month.