Rate hikes, corporate debt drag on lending to SMEs

Central bank rate hikes and debt repayments by corporations dragged growth in local banks’ lending to small and medium-sized enterprises (SMEs) last year compared with the previous year, the Financial Supervisory Commission said yesterday. However, last year’s new loans totaled the third-highest on record, commission data showed. The economy heavily depends on exports, and SMEs indirectly contribute to exports by supporting large manufacturers in the supply chain, analysts said. Interest rate adjustments, an economic slowdown and volatile markets, domestically and worldwide, could affect SMEs’ appetite for loans used as corporate working capital or for other purposes such as real-estate purchases, they said. Last year, new SME loans extended by domestic banks decreased to NT$594.56 billion (US$19.79 billion), down from NT$876.29 billion a year earlier and NT$914.49 billion in 2020, commission data showed. The figures for 2020 and 2021 were the highest and second-highest on record respectively, the data showed. The commission has been encouraging banks to extend more loans to companies affected by the COVID-19 pandemic in the past few years, and the new SME loans last year reached 169.87 percent of the commission’s annual target of NT$350 billion, it said. State-run First Commercial Bank (第一銀行) approved NT$63.5 billion in new loans for SMEs last year, the highest among all local banks, commission data showed. It was followed by CTBC Bank (中信銀行) with NT$51.8 billion, Bank SinoPac (永豐銀行) with NT$47.3 billion, state-run Land Bank of Taiwan (土地銀行) with NT$43.7 billion and E.Sun Commercial Bank (玉山銀行) with NT$37.5 billion, the data showed. Aggregated SME loans by domestic banks came to NT$9.28 trillion at the end of last year, accounting for 65.32 percent of all corporate loans extended by banks, up 0.59 percentage points from the previous month, the commission said. The nonperforming loan ratio for SME loans was 0.26 percent as of Dec. 31, flat from a month earlier, it added.

By Chen Cheng-hui

Record credit spending on accommodation forecast

Credit card spending on accommodation in Taiwan for the whole of last year is expected to hit a record high, due to consumers resuming travel after the government relaxed COVID-19 restrictions, National Credit Card Center data showed. The data showed that credit card spending in the first eight months of last year gradually rebounded to levels prior to the COVID-19 pandemic. The monthly average for credit card spending on local hotels was NT$6.75 billion (US$224.68 million) during the January-to-August period, higher than the NT$5.78 billion recorded in 2021, but slightly lower than the peak of NT$6.81 billion in 2019, the data showed. Credit card spending recovered particularly well in July and August, surpassing NT$9 billion in each month, after being relatively low in the first half of last year, the center said in a report. “Consumers refrained from traveling locally in the first half of last year, but began to get used to the situation from summer onward,” the center said. As Taiwan only reopened its borders in October last year, record credit card spending on local accommodation is forecast for last year, the center said. Accommodation priced below NT$3,000 remained the most popular, making up 59.5 percent of all transactions and slightly lower than the 60.6 percent recorded in 2019. Even though Taipei, with a market share of 30 percent, continued to rank first in terms of credit card spending, its accommodation sector took hit, as spending dropped 18 percent annually. “Hotels in Taipei generally attract business travelers, whose needs were far less than regular travelers amid the pandemic,” the center said. Other areas such as Hualien and Taitung counties reported annual increases of more than 40 percent, it said.

By Kao Shih-ching

Driving business

Molly Peck, chief marketing officer of GMC and Buick at General Motors Co (GM), presents a GMC Sierra Denali truck during GM Korea Co’s launch event in Seoul yesterday. GM’s South Korean unit plans to expand online sales in the country and operate 400 service centers.

ChatGPT mania pumps up China AI tech stocks

SPECULATION: Shares soared, even though there was no indication the companies were close to launching an AI product, and several expected to report losses for last year

Chinese artificial intelligence (AI) stocks are the latest rage in mainland markets as the global frenzy around the Microsoft Corp-backed ChatGPT chatbot spurs speculative bets on the revolutionary computing technology. Just two months after its launch, ChatGPT — which can generate articles, essays, jokes and even poetry in response to prompts — has been rated the fastest-growing consumer app in history. That has pushed Google owner Alphabet Inc to plan its own chatbot service and using more AI for its search engine. While ChatGPT is not accessible in China, mainland investors are still pumping up the shares of AI technology companies such as Hanwang Technology Co (漢王科技), TRS Information Technology Co (拓爾思信息技術) and Cloudwalk Technology Co (雲從科技). The CSI AI Industry Index, which includes larger capitalized companies such as iFlytek Co (科大訊飛), is up about 17 percent this year, outperforming the benchmark CSI300 Index’s 6 percent rise. To be sure, there is no indication that these AI companies are close to pushing out a ChatGPT-like product. The closest seems to be search engine giant Baidu Inc (百度) with plans to complete testing of its “Ernie bot” next month. Its shares surged more than 15 percent yesterday after making the announcement. Ernie, for “Enhanced Representation Through Knowledge Integration,” is a large AI-powered language model introduced in 2019, Baidu said. It has gradually grown to be able to perform tasks including understanding language, language generation and text-to-image generation, it added. A person familiar with the matter last week said that Baidu aims to make the service available as a standalone application and gradually merge it into its search engine by incorporating chatbot-generated results when users make search requests. Meanwhile, Alphabet chief executive Sundar Pichai on Monday wrote in a blog post that his company is opening a conversational AI service called Bard to test users for feedback, followed by a

Coupang turns to robots in profit bid

Coupang Inc, the South Korean e-commerce pioneer that has lost billions of dollars since its founding, is rolling out an army of robots at fulfillment centers in a bid to reach profitability. The nation’s answer to Amazon.com Inc, Coupang burned cash by building distribution centers around the country that could help it push the boundaries of speedy delivery with broad selection. Now the company is closing in on breaking even, with analysts projecting it would turn a profit for the second straight quarter and then report its first annual operating profit this year. The extreme automation was on display on a cold day this month at a Coupang facility in the southern city of Daegu. Squat autonomously guided vehicles marched toward a collection point like school kids lining up for lunch. The machines, which can carry 1,000kg, look like bookshelves riding on Roomba cleaners, delivering payloads to pickers and sorters. The workload for humans has been cut by about 65 percent. Coupang has invested about US$260 million in the 12-story fulfillment operation in Daegu, and it is revealing its humming, artificial-intelligence-directed nerve center for the first time. The typically low-profile company is going public because it plans to adopt this kind of automation in other facilities. “There are more expansion plans,” E.J. Choi, regional director of fulfillment services, told Bloomberg TV at the Daegu fulfillment center. The new facility provides a model for improving the “effectiveness of how we operate to continue to deliver our customer service, while we are reducing the intensity of our workers’ workloads.” The number of customers continued to increase even though a recent price hike as the company pushed to deliver products faster and in a wider swath of regions. Still, Coupang’s stock is off by more than half since its listing in New York in March 2021 at US$35 per share. The company

Get physical

People ride stationary bicycles at an exhibition stall on day two of India Energy Week in Bengaluru yesterday. The event aims to showcase the country’s rise as an energy transition powerhouse and efforts to meet Indian Prime Minister Narendra Modi’s pledge to cut the country’s emissions to net zero by 2070. The three-day event, which started on Monday, ends today.

Taiwan Business Quick Take

EQUITIES TAIEX rises slightly The TAIEX yesterday closed little changed after moving in a narrow range throughout the session. Despite the bellwether electronics sector staying weak, with large-cap semiconductor stocks particularly sluggish, old economy stocks in the biotech and tourism industries received a boost from rotational buying, lending some support to the broader market. The TAIEX closed up 8.09 points, or 0.05 percent, at 15,400.91. Turnover on the main board totaled NT$187.587 billion (US$6.24 billion), with foreign institutional investors selling a net NT$3.28 billion of shares, Taiwan Stock Exchange data showed. The electronics sector lost 0.15 percent, with the semiconductor subindex falling 0.37 percent. The biotech industry rose 1.25 percent, the tourism sector was up 1.11 percent and the financial sector moved 0.17 percent higher. IC DESIGN Global Unichip soars 5.39% Shares of Global Unichip Corp (GUC, 創意電子), an application-specific IC design subsidiary of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), yesterday rose 5.39 percent to close at NT$841 on expectations that the company would be included in the MSCI Global Standard Indexes set to be released later this week. The company’s share price outperformed its parent company, as TSMC fell 0.57 percent to close at NT$523 yesterday. GUC, whose business also includes nonrecurring engineering services, on Monday reported its consolidated revenue last month fell 33.06 percent month-on-month, but rose 26.81 percent year-on-year to NT$2.09 billion. The company posted record-high revenue, operating profit and net profit for last year on strong demand, and has said that revenue this year would grow by double-digit percentage points from last year and earnings per share could exceed the previous year’s NT$27.69. BIOMEDICINE Energenesis approved The Taiwan Stock Exchange’s securities listing review committee has approved the initial listing application of Energenesis Biomedical Co (華安醫學), the exchange said in a statement yesterday. Under chairman Chiu Jen-yi (邱壬乙), Energenesis has paid-in capital of NT$668.45 million.

Australia hikes rates to 10-year high

ANTICIPATED MOVE: Although homeowners are under ‘mortgage stress,’ the Reserve Bank of Australia said that more hikes are likely in the next few months

Australia’s central bank yesterday hiked interest rates to a 10-year high as it tries to rein in surging inflation while trying not to trigger a recession. The Reserve Bank of Australia lifted borrowing costs 25 basis points to 3.35 percent, marking the ninth successive increase and highest rate since October 2012. The widely anticipated move comes as central banks around the world tighten monetary policy in the face of runaway food and energy prices partly caused by Russia’s war in Ukraine. The central bank’s board said global inflation remained “very high” — the consumer price index hit a three-decade high of 7.8 percent in the October-to-December period — and that further hikes were likely in coming months. Australia, like most countries fighting inflation, faces a balancing act between bringing prices under control, while not being too aggressive and sparking a recession. The IMF last year forecast that the country should narrowly avoid a contraction. Another major risk is whether Australian homeowners can afford to pay the higher interest rates tacked on to their mortgages. Market research firm Roy Morgan last year estimated that one in five Australian households were under “mortgage stress” and struggling to meet repayments. The central bank said that some households were “experiencing a painful squeeze on their budgets due to higher interest rates and the increase in the cost of living.” Australian Treasurer Jim Chalmers defended the bank’s decision. “The Reserve Bank makes these decisions independently, and it’s not our job in this place to interfere or to second-guess their decisionmaking or pressure them in any way,” he told parliament. Australia has also temporarily capped the wholesale prices of gas and coal in a bid to bring down electricity prices, which are forecast to rise as much as 50 percent in the next two years.

Softbank posts loss of US$5.9bn amid tech slump

‘TOUGH ENVIRONMENT’: While things did not look promising for the group heading into 2023, the recovery in China might benefit it, an analyst said

Japan’s Softbank Group Corp yesterday reported a surprise US$5.9 billion net loss in the fiscal third quarter, as a slump in the tech sector continued to hit the investment behemoth’s bottom line. The loss compared with the net profit of ￥29 billion (US$220 million) the firm reported in the same three-month period last year. Its two Vision Fund investment vehicles alone lost ￥660 billion in the October-to-December quarter, “reflecting declines in the share prices of a wide range of portfolio companies,” Softbank said. The firm has made huge bets to find and grow hot new tech ventures around the world, but that has left its earnings vulnerable to fickle market forces, and its Vision Funds have reported losses for four straight quarters. Interest rate hikes by the US Federal Reserve and other central banks to tackle inflation have weighed on global tech shares, putting pressure on Softbank. “Weakness in global equity markets remains the main risk to the Softbank story,” said Kirk Boodry, an analyst at Redex Research who publishes on Smartkarma. Softbank chief executive officer Masayoshi Son has regularly defended his strategy of making major bets on high-tech firms and start-ups, saying that the approach would lead to a handful of significant wins that outweigh losses. However, his tactics have come under increasing scrutiny given the firm’s successive losses, and Son is not delivering the company’s results presentation. Softbank chief financial officer Yoshimitsu Goto was expected to do the talking instead yesterday. Last quarter, Goto said that the company was “very pessimistic.” Analysts said there was good reason to be cautious. “The overall investment environment is very tough including on US shares,” Toyo Securities Co analyst Hideki Yasuda said before the results. However, he and other observers say the firm might start to see the benefits of an improving situation in China. “We are generally somewhat negative on Softbank’s positioning heading

UK closer to having digital currency

Britcoin is moving closer to reality. British authorities on Monday said that businesses and consumers in the UK are likely to need a digital version of the pound, formally asking for public comment on the idea of introducing a central bank digital currency. The UK, home to the world’s second-biggest financial center, is trailing former colonies such as Nigeria, the Bahamas and Jamaica in rolling out a digital currency. More than 80 percent of the world’s central banks are considering launching digital currencies or have already done so, PricewaterhouseCoopers says. “While cash is here to stay, a digital pound issued and backed by the Bank of England could be a new way to pay that’s trusted, accessible and easy to use,” British Chancellor of the Exchequer Jeremy Hunt said in a statement. “That’s why we want to investigate what is possible first, whilst always making sure we protect financial stability.” The call for public input comes almost two years after the British Treasury and the Bank of England said they were considering introducing a digital currency. While British Prime Minister Rishi Sunak suggested naming the initiative “Britcoin” when he was Treasury chief, the Bank of England has said that the potential currency should not be confused with cryptocurrencies such as bitcoin. Backed by the central bank, the new currency would be “reliable and retain its value over time,” in contrast to cryptocurrencies that can fluctuate wildly and threaten the holdings of investors, the Bank of England says on its Web site. That industry has been particularly unstable in the past few months, escalating calls for greater regulation. Crypto crashes last year tanked assets, while crypto exchange FTX’s multibillion-dollar collapse and bankruptcy in November last year triggered fraud charges against founder Sam Bankman-Fried. The proposed digital currency would be denominated in pounds, with 10 pounds of digital currency

S Africa hit by halt in investment: top mine employer

Investors have lost faith in South Africa’s government and have stopped investment despite a wealth of opportunities, the head of the country’s biggest employer in the crucial mining industry said. More than 200 days of power cuts last year and blackouts every day so far this year have dented confidence, as has the poor performance of the state transport utility and a plethora of other problems. Pledges to enact reforms to spur the economy have come to little, Sibanye Stillwater Ltd chief executive officer Neal Froneman said. “There is much more that we can invest in and the rest of South African businesses can invest in if the climate was different, if we had power, if we had clear policies and if it was more environmentally friendly,” Froneman said in an interview last week. “Business investment in South Africa is on strike until things improve.” Corruption, crime and mixed messages from government ministers as to how quickly the country is to transition to cleaner energy has also drawn criticism from a range of business leaders. Investment has been confined mainly to keeping existing businesses running rather than expanding their operations. Mining accounted for 4 percent of GDP last year, employed about 476,000 people and generated 878 billion rands (US$49.7 billion) of exports, said Minerals Council South Africa, a lobby group representing most mining groups operating in the country. Largely as a result of the problems Froneman laid out, economic growth is anemic with economists surveyed by Bloomberg forecasting an expansion of 1.2 percent this year. At 32.9 percent, unemployment is among the highest across more than 80 countries tracked by Bloomberg. “Investors are very negatively disposed toward South Africa,” Froneman said. “They’ve lost faith and they’ve lost trust in the government.” Mining companies, among the nation’s biggest electricity users, are scaling down some activities. The outages probably

Boeing to cut about 2,000 finance and HR jobs this year

Boeing Co plans to make staffing cuts in the aerospace company’s finance and human resources (HR) departments this year, with about 2,000 jobs being lost, the firm said. “We expect about 2,000 reductions primarily in Finance and HR through a combination of attrition and layoffs,” Boeing wrote in a statement on Monday. “While no one has been notified of job loss, we will continue to share information transparently to allow people to plan.” The company, which recently relocated its headquarters to Arlington, Virginia, said it expects to “significantly grow” the overall workforce during the year. “We grew Boeing’s workforce by 15,000 last year and plan to hire another 10,000 employees this year with a focus on engineering and manufacturing,” it said. Boeing’s total workforce was 156,000 employees as of Dec. 31 last year, the company said. The Seattle Times reported that Boeing plans to outsource about one-third of the eliminated positions to Tata Consulting Services Ltd in Bengaluru, India. Mike Friedman, a senior director of communications, told the Times that the other positions would be eliminated as the company makes reductions in finance and human resources support services. “Over time, some of our corporate functions have grown quite large. And with that growth tends to come bureaucracy or disparate systems that are inefficient,” Friedman said. “So we’re streamlining.” About 1,500 of the company’s approximately 5,800 finance positions would be cut, with up to 400 more job cuts in human resources, the Times reported.

Bean me up, scotty

Yuu Matsuzaki, a product buyer for the Marui Group, tries on a wearable beanbag at a pop-up booth at the Shinjuku Marui Main Building department store in Tokyo on Monday. While the beanbag’s goofy onion-shaped style made it a hit on Japanese social media earlier this month, its main goal is relaxation, said Shogo Takikawa, a representative of the beanbag’s manufacturer, Takikou Sewing Ltd.

World Business Quick Take

AVIATION Mitsubishi ditches SpaceJet Mitsubishi Heavy Industries Ltd has ended development of its SpaceJet aircraft — a domestic short-haul jet that was to supply local carriers including ANA Holdings Inc — after spending hundreds of millions of US dollars on the project. Tokyo-based Mitsubishi Heavy lacked the understanding and technological know-how for SpaceJet to materialize, chief executive officer Seiji Izumisawa said yesterday. Growing pressure to electrify and decarbonize, among other factors, forced the manufacturer to reassess its strategy, he added. ENERGY BP reports net loss BP PLC slid into a net loss last year after its exit from Russia following Moscow’s invasion of Ukraine, the British energy giant announced yesterday, despite a surge in oil prices. The company posted annual losses after tax totaling US$2.5 billion, compared with net profit of US$7.6 billion in 2021. Excluding the exceptional hit, profit more than doubled to US$27.7 billion on soaring oil and gas prices, mirroring huge earnings last year by BP rivals such as Shell PLC and Exxon Mobile Corp. BP said its fourth-quarter dividend would rise 10 percent, and announced a fresh buyback totaling US$2.75 billion. GAMING Nintendo drops profit outlook Nintendo Co yesterday cut its full-year net profit forecast, saying the global chip shortage and other supply chain problems had hit console sales in the nine months to December last year. The Japanese gaming giant also trimmed the annual hardware sales forecast for its Switch console to 18 million units from a previous target of 19 million. New games such as Pokemon Scarlet and Violet and Splatoon 3 have performed well, the Kyoto-based company said. However, hardware sales by unit declined 21 percent year-on-year in the April-to-December period, “mainly due to a shortage of semiconductors and other component supplies that impacted production until around late summer,” Nintendo said. BREWERS Carlsberg expects hard year Danish brewer Carlsberg A/S said yesterday that

Manufacturing business monitor signals recession

‘BLUE’ LIGHT: The TIER business composite index fell to 9.48 for the manufacturing sector in December, and the ratio of firms in decline increased to 74 percent

The climate monitor for the nation’s manufacturing sector in December last year was “blue” for the second consecutive month, as global inflation and interest rate hikes lowered demand and prices for most products, the Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) said yesterday. The TIER business composite index shed 0.24 points to 9.48, indicating a recessionary state, after the sub-indices on demand and selling prices weakened, but the readings for operating conditions, costs and raw material prices improved marginally, the Taipei-based think tank said. Major customers continued to adjust inventory to cope with soft end-market demand amid a global economic slowdown and monetary tightening, the institute said, adding that Taiwan’s latest exports and export orders declined by double-digit percentage points for two months in a row. China’s recent scrapping of COVID-19 restrictions increased infections in the country, disrupting supply chains, but fueling hopes for a fast recovery, it said. TIER uses a five-color spectrum to capture the industry’s movements, with “red” indicating a boom, “green” suggesting a steady state and “blue” signifying a downturn. Dual colors indicate a transition to a better or worse condition. The number of firms in business decline jumped from 59.04 percent in November last year to 73.63 percent in December, and none reported a boom, TIER said. Demand for electronics used in high-performance computing and electric vehicles remained solid, but sales of smartphones and notebook computers stalled, as global consumers cut back spending on technology gadgets, it said, adding that it caused the business climate for the sector, which is the main export driver, to signal “blue.” The climate monitor for petrochemical and plastic sectors was also “blue,” as labor shortages in China deteriorated due to spiking virus infections, the institute said. Firms generally reported a retreat in business, and grew conservative in input and inventory management, it said. Suppliers of necessity

By Crystal Hsu

NT dollar rally likely near peak

‘WEAK OUTLOOK’: Taiwan’s currency could weaken past NT$30 per US dollar, as traders place optimistic bets on China’s reopening, a market strategist said

The nation’s weakening economic outlook could spell the end of a rally for the New Taiwan dollar as investors reassess optimistic wagers on China’s reopening and a recovery in global demand for semiconductors. The New Taiwan dollar is near its strongest level since June last year after rallying along with emerging-market peers on signs that global interest rates are reaching their peak. However, Taiwan’s darkening economic outlook and mounting tension between the US and China threaten to cap further gains, analysts said. “Taiwan’s economic outlook remains weak and while it has seen equity inflows recently, the tech cycle is yet to turn and geopolitics will continue to weigh,” Credit Agricole CIB senior emerging markets strategist Eddie Cheung (張敬勤) said. The currency is likely to weaken past NT$30 per US dollar in the coming weeks as traders pare optimistic bets on China’s reopening, he said. The NT dollar traded 0.28 percent lower at NT$29.984 per US dollar yesterday in Taipei trading. The headwinds for the NT dollar are mirrored by challenges facing other regional peers, boosting chances for the greenback to mount a comeback in Asia. South Korea’s won could also be affected by falling demand from semiconductors, while pressure on current-account deficits look set to weigh on India’s rupee and the Philippine peso, analysts said. The rally has already taken Taiwan’s currency into overbought territory versus the greenback, according to slow stochastics, a technical momentum indicator, suggesting it could struggle to make near-term gains. Technical resistance around NT$29.02 per US dollar, the high of May 31 last year, is also poised to cap any advance. Chipmakers including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) are major contributors to the economy, and the nation benefited from the COVID-19 pandemic-fueled surge in demand for electronics. However, orders for the country’s cutting-edge technology have since waned, and TSMC rival Samsung

Industrial PC makes post record sales last month

Two of the nation’s leading industrial PC solutions providers yesterday reported their best January sales on record, despite there being fewer working days due to the Lunar New Year holiday. However, whether growth momentum can last remains to be seen as the global economy slows and the outlook for customer orders turns conservative. Advantech Co’s (研華) consolidated revenue was NT$5.64 billion (US$188.1 million) last month, up 4.76 percent year-on-year and slightly higher than the previous month, the company said in a statement. Sales in Europe and Japan posted the highest growth, up 26 percent and 37 percent respectively from a year earlier, the company said. North America also posted a single-digit percentage increase in revenue last month despite sticky inflation, said Advantech, which is the first regional industrial PC vendor dedicated to smart cities and the Internet of Things (IoT). However, Taiwan, China and emerging markets performed relatively weakly due to the week-long Lunar New Year holiday, while the effect of China lifting its “zero COVID-19” policy is not yet certain, as the reopening is still in its early stage, the company said. Advantech said three major business groups — embedded IoT, industrial cloud and video, and applied computing — showed double-digit percentage growth in sales last month from a year earlier. However, the industrial IoT group and the service IoT group posted double-digit percentage drops in revenue due to a higher comparison base a year earlier, it added. Ennoconn Corp (樺漢), an industrial computer subsidiary of Hon Hai Precision Industry Co (鴻海精密), said its consolidated revenue for last month increased 23.4 percent annually to NT$8.85 billion. The company provides hardware solutions for point-of-sale, banking automation, kiosk, lottery and industrial automation systems. The company’s design and manufacturing unit reported a 27.1 percent increase in revenue last month from a year earlier, thanks mainly to robust European

By Chen Cheng-hui