Tue, Oct 26, 1999 page17

• Merger fever hits mutual fund firms

  QUAKE EFFECT Mutual fund companies saw assets under their control drop in the aftermath of the 921 quake, prompting some analysts to speculate that industry consolidation could pick up as a result

  • By Stanley Chou / STAFF REPORTER
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  The nation's mutual fund industry lost control of NT$32.5 billion in assets last month because of the 921 earthquake, according to the Association of Securities Invest-ment Trust & Advisory (投信投顧?蔆|).

  Meanwhile, several large mutual fund companies have been exploring merger possibilities. One potential match-up involves International Investment Trust Co (國際投信) and National SITC (建弘投信).

  In addition, the president of Kwang Hua SITC (光華投信) said five foreign suitors were courting his fund company.

  Analysts speculated that the quake's effect could accelerate consolidation in the mutual fund industry.

  Total assets managed by Taiwan's 33 fund companies at the end of September dropped to NT$964.5 billion, a NT$32.5 billion decrease from the previous month, according to the association.

  An association executive said much of the decrease could be attributed to panic selling in the wake of the 921 quake. He added that the top 10 fund companies were especially hurt.

  Total assets managed by these companies decreased to NT$60.8 billion in September. Analysts said the huge decline has made consolidation of large fund companies even more likely.

  The two largest shareholders of International Securities Investment Trust Co (國際投信) -- Central Trust Co (??央投資?膝q) and CIBC (??國國際商業銀|?/CHINESE>) -- have been pushing a merger between International and National.

  If successful, the combination would create the largest mutual fund company in Taiwan, as International and National together managed NT$98.7 billion in assets as of last month.

  The largest fund company currently is China SITC (??華投信), with NT$96.5 billion assets. It would lose its number one spot if the International-National deal is goes through.

  Central Investment Co controls 22.5 percent of outstanding shares in International, and CIBC controls another 14 percent. Reports indicate these shareholders would like to sell their holdings to National SITC, thus merging the two companies.

  However, another major International shareholder, Fubon Group (富?集1?/CHINESE>), is said to oppose the idea.

  Company officials declined to comment on the merger talks and person close to the companies involved said negotiations continue.

  International and National are among the largest and oldest fund companies in Taiwan, ranked No. 12 and No. 5 by asset size, respectively.

  Both were one of the four mutual fund companies established in 1988 when the government deregulated the fund industry.

  The other two fund companies established at that time same were China SITC and Kwang Hua SITC.

  Reports indicate Kwang Hua SITC may be soon taken over by a foreign fund company, which sees the acquisition as a way to enter the Taiwan asset management market.

  "There are five candidates, all foreign companies, who all have intention to take over Kwangg Hua SITC, and it would be completed the earliest at the beginning of next year after one of them is chosen," said Chang Cha-yu (311聽?/CHINESE>), president of Kwang Hua SITC. "The only problems remained are the take over price and which foreign group will be more helpful to Kwang Hua SITC's future prospects."

  Kwang Hwu SITC's largest shareholder, Yin Yen-liang (??l樑), who controls 62 percent of the company, has decided to sell his shares to one of the five foreign companies, Chang Cha-yu said.

  "The 921 earthquake has become a stimulus to some major shareholders of fund companies to sell their holdings," said K.P. Liu (劉3穸-), president of SinoPro Securities Investment Consulting.

  "[Shareholders of fund companies] would certainly wish to sell at a better price before the fund size shrinkS further," he said. "When more and more new fund companies enter the market, the market shares of the large fund companies will definitely go down."
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