Shin Kong Financial Holding Co (新光金控) aims to shift a quarter of its overseas investment to China and yuan-denominated instruments as the markets in the US and Europe are likely to remain volatile for quite a while, senior executives said yesterday.
“We plan to increase our holdings in Chinese shares and bonds to 10 percent of our total foreign portfolio to diversify investment risk,” Shin Kong Financial senior vice president Sunny Hsu (徐舜鋆) said.
The sluggish economy in the US and Europe’s sovereign debt crisis warrant the adjustment, which is consistent with the group’s expansion plans in China, Hsu said.
That means Shin Kong Financial expects to channel NT$138.3 billion (US$4.6 billion) of its NT$1.38 trillion in investment funds into Chinese fixed income securities, equities and other investment vehicles, based on company data.
Shin Kong Life Insurance Co (新光人壽), the company’s flagship unit, obtained qualified foreign -institutional investors status from the Chinese regulator late last month, allowing it to trade Chinese shares, Shin Kong Financial president Victor Hsu (許澎) said.
The life insurer’s Shaanxi Province branch is expected to start operations in Xian City before the end of the year, Victor Hsu said.
Shin Kong Financial also plans to launch a capital leasing subsidiary in Suzhou, China, later this month to take advantage of higher lending costs in the Chinese market, he said.
However, Shin Kong Financial is cautious about its earnings outlook going forward, although net profit soared more than four times from the second to the third quarter at NT$4.22 billion, thanks to dividend income and foreign exchange gains, Sunny Hsu said.
The group reported NT$3.36 billion in cash dividend income and NT$530 million in foreign exchange gains during the July-to-September period, the company’s report showed.
Shin Kong Financial net income totaled NT$6.13 billion for the first nine months, or earnings per share of NT$0.73, lagging behind 10 other peers, the report showed. There are 14 listed financial holding companies in Taiwan.
“We will exercise more caution in loan operations, which have peaked this year after expanding nearly 20 percent from last year,” Sunny Hsu said.
While the life insurance arm is set to book NT$23.6 billion in profit from real-estate sales this quarter, higher loan reserves at the banking unit will dilute earnings.
Shin Kong Commercial Bank (新光銀行) plans to set aside a monthly NT$80 million provision this quarter to raise its loan reserve ratio to 1 percent, as the Financial Supervisory Commission has urged lenders to buffer potential losses, Sunny Hsu said.
Shin Kong Bank’s net interest margin improved to 1.59 percent in September, but is likely to shed one basis point in the coming months now that the central bank has halted interest rate increases, he said.
Shin Kong Financial shares closed flat yesterday at NT$9.25.
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