Fri, Jan 09, 2015 page13

• FSC head allays banks’ THSRC fears

  MINIMAL RISK: JPMorgan said that as Taipei Fubon Commerical is the only bank holding common shares, any adverse impact on the sector should be manageable

  • By Amy Su / Staff reporter
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  Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) yesterday said Taiwanese banks would be able to secure their loans to debt-ridden Taiwan High Speed Rail Corp (THSRC, 台灣高鐵), as long as the government does not close the company down.

  Tseng made the remarks at a meeting of the legislature’s Finance Committee, after the government’s financial restructuring plan for THSRC failed to secure lawmakers’ support a day earlier, which may lead the high-speed rail company to declare bankruptcy in the near future.

  Legislators on the Finance Committee expressed their concerns over the potential impact on the nation’s banking sector, which has provided a total of NT$308.3 billion (US$9.63 billion) in syndicated loans to THSRC.

  

  Taiwan Solidarity Union Legislator Lai Chen-chang speaks at a meeting of the legislature’s Finance Committee in Taipei yesterday.

  Photo: Wang Meng-lun, Taipei Times

  “As long as the government keeps THSRC operational, bank consortiums in Taiwan will see their rights protected and the public does not need to worry about the issue,” Tseng said.

  On top of the syndicated loans, THSRC also owes about NT$60 billion to Taiwanese banks, government data showed.

  These lenders have asked the company to open an impound account for repayment, with the outstanding balance of the account currently standing at NT$43.9 billion, Tseng said

  JPMorgan Securities (Taiwan) Ltd said the underlying asset quality risks the nation’s financial sector faces from the THSRC case are not as serious as some local media have suggested, in terms of either preferred shareholders or bank consortiums.

  “Common shareholders could suffer, but not preferred shareholders,” JPMorgan analysts Jemmy Huang (黃聖翔) and Josh Klaczek said in a note yesterday.

  JPMorgan said that in this case, Taipei Fubon Commercial Bank (台北富邦銀行) is the only bank that holds common shares of THSRC, therefore, any potential adverse impact on the banking sector’s earnings should be manageable, it said.

  However, it is worth monitoring whether state-run banks will be forced to provide more national services thereafter, JPMorgan said.

  Also yesterday, Tseng reiterated that the commission would accelerate the opening of the nation’s stock market to Chinese individual investors in a bid to attract more investment and turnover momentum for the local equity market.

  “We will basically adopt a ‘national treatment’ and deal reasonably with the details of the deregulation of Chinese individual investors,” Tseng said.

  Some lawmakers were cautious about the plan, fearing that the move would give China a greater grip on Taiwan’s economy.

  “What if Taiwan’s listed companies are bought by China? China has many problems involving corruption and illegal gains. What if [Chinese individuals] use this channel to come to Taiwan to launder money?” Taiwan Solidarity Union Legislator Lai Chen-chang (賴振昌) said at the meeting.

  In response, Tseng said Chinese individuals would be subject to the same restrictions as institutional investors.

  Under Taiwanese regulations, Chinese institutional investors can only own up to 10 percent of local gas, financial or other companies controlled by the Ministry of Economic Affairs, and 8 percent for shipping firms.

  However, they are barred from buying shares in airlines, air cargo, futures, construction, real estate and broadcasting.

  The commission’s Securities and Futures Bureau said the government also might not allow Chinese individual investors to conduct margin trading, in line with current limitations for Chinese and foreign portfolio investors.

  Tai Hui (許長泰), a Hong Kong-based chief market strategist at JPMorgan Asset Management Ltd, said opening up a country’s equity market to a new kind of investor is beneficial to the market in the long term as an increase of the market’s investment channels.

  However, the move might raise the equity market’s volatility in the short term, which depends on market sentiment at the time, with the quota being opened to be the other factor determining the effect on the market, Hui added.

  Additional reporting by AFP
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