Taiwan intends to ease rules on share buybacks for financial firms including Cathay Financial Holding Co (國泰金控) and Mega Financial Holdings Co (兆豐金控) after its benchmark equity index last week posted the biggest drop in seven years.
The number of financial holding companies allowed to repurchase stocks will rise to 12 from five following a reduction in the required capital adequacy ratio, a measure of financial strength, the Financial Supervisory Commission (FSC) said in a statement on its Web site yesterday.
“We consider the measure a positive step,” said David Dong, who helps manage the equivalent of US$1.9 billion at President Investment Trust Corp (統一投信) in Taipei. “It’ll help the stock market more if government-controlled banks and companies can buy back shares to set examples for others.”
Financial holding companies with a capital adequacy ratio of at least 105 percent would be permitted to buy back shares, compared with the current threshold of 110 percent, the commission said.
It didn’t say when the rule will be effective.
Taiwanese stocks climbed, driving the benchmark index to its biggest gain in more than four years, as the US government’s takeover of Fannie Mae and Freddie Mac also helped ease concern that losses at financial companies this year will widen.
Cathay Financial and Fubon Financial Holding Co (國泰金控), Taiwan’s two largest financial-services companies, advanced by their daily limit.
Under the new rules, financial holding companies must have at least 5 percent above the minimum capital for all its combined holdings to meet the required ratio, Jean Chiu, a FSC supervisor, said by telephone from Taipei yesterday.
The minimum capital adequacy ratio is 8 percent for a banking unit, 250 percent for an insurer and 300 percent for a securities division, Chiu said.
Cathay added NT$3.70, or 6.9 percent, to NT$57.60.
Fubon advanced NT$1.70, or 6.9 percent, to NT$26.30.
At least 20 of the 35 firms in the TAIEX’s sub-group of financial companies surged by their daily limits.
The TAIEX fell 10.5 percent last week, the most since September 2001.
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