Taiwanese banks are expected to outperform insurers next year, as their earnings are less susceptible to the impacts of recent monetary policy changes, analysts said.
The central bank on Thursday lowered policy interest rates by 12.5 basis points for the second time in three months, just a day after the US Federal Reserve announced that it was hiking rates by 25 basis points.
Credit Suisse AG listed E.Sun Financial Holding Co (玉山金控) as its top long play for next year, and life insurance-heavy Fubon Financial Holding Co (富邦金控) as its top short play.
It is upbeat on E.Sun Financial’s strong fee income earnings, which are expected to sustain a growth momentum at two to three times of its peers, on the back of its wealth management unit.
E.Sun Financial’s earnings should also be boosted by declining operating expenses, a Credit Suisse report said.
With its tier 1 ratio above 9 percent and group leverage ratio among the lowest in the sector, E.Sun’s capital position can support growth for the next two to three years, the report said.
A Tier 1 capital ratio measures a bank’s financial strength based on the sum of its core equity capital and total risk-weighted assets.
The report said that earnings by Fubon Life Insurance Co (富邦人壽), the primary life insurance subsidiary of Fubon Financial, would be very vulnerable to a rise in US interest rates.
The positioning of Fubon Life’s investment portfolio and products have mostly been geared toward sustained low interest rates. As a result, its investment book value fell by NT$74 billion (US$2.23 billion at current exchange rates) in the six month period ending in the third quarter because of market-to-market losses.
This caused the double leverage ratio of the holding company sequentially to rise by 8 percent to 121 percent in the third quarter.
Industry watchers have said the lower the double leverage reading, the better a company’s capital strength, as it indicates the firm’s lower risk in financing assets with debt and other liabilities.
Yuanta Securities Investment Consulting Co (元大投顧) analyst Peggy Shih (施姵帆) named E.Sun Financial as her firm’s top pick in a report published on Thursday.
She cited its large fee income contribution, which is estimated at about 35 percent of total net revenue.
Following the central bank’s two rate cuts this year, Shih is expecting Taiwan’s 10-year bond yield to fall 50 basis points from a high of 1.65 percent in the first half to 1.17 percent, which would strain domestic insurers’ recurring income yields.
Domestic insurers usually allocate up to 40 percent of assets to domestic bonds, cash and mortgage loans, which are susceptible to central bank moves, she said.
“Insurers might suffer up to a 5 percent decrease in their earnings-per-share performance next year as a result of the rate cut, and their liability reserve is also likely to increase, given lower discount rates from now on,” Shih said.
SELF-SUFFICIENCY: Alibaba is one of a number of Chinese firms that has answered Beijing’s call to invest in the development of cutting-edge technologies Alibaba Group Holding Ltd (阿里巴巴) yesterday unveiled a new server chip that is based on advanced 5-nanometer technology, marking a milestone in China’s pursuit of semiconductor self-sufficiency. The Chinese tech giant’s newest chip is based on micro-architecture provided by the SoftBank Group Corp-owned Arm Ltd, it said. Alibaba, which is holding its annual cloud summit in Hangzhou, China, said that the chip is to be used in its own data centers in the “near future” and would not, for the time being, be sold commercially. “Customizing our own server chips is consistent with our ongoing efforts toward boosting our computing capabilities with better
Production at Taiwan Semiconductor Manufacturing Corp’s (TSMC, 台積電) fabs was not affected by a fire at a construction site for a water recycling facility in the Southern Taiwan Science Park in Tainan. The world’s biggest contract chipmaker said that the construction site is not adjacent to its fabs, which were unaffected. CTCI Corp (中鼎工程) is responsible for the construction of the facility, which it is to operate itself once it is completed, the chipmaker said. The facility caught fire at about 11am, and the blaze was brought under control about 30 minutes after the incident was reported, the Southern Taiwan Science Park Administration
‘SHORT-TERM ECONOMIC PAIN’: A military takeover would only temporarily weigh on wafer production on both sides of the Taiwan Strait, IC Insights said Taiwan has more chip manufacturing capacity than any other economy in the world, US-based market information advisory firm IC Insights said in a research paper last week, cautioning that the nation’s strength could prompt China to attempt to take over Taiwan. Taiwan commanded 21.4 percent of global installed IC capacity, ahead of South Korea’s 20.4 percent, Japan’s 15.8 percent and China’s 15.3 percent, North America’s 12.6 percent and Europe’s 5.7 percent, IC Insights said. Taiwan is one of two countries that uses 10-nanometer technology or better to produce wafers, holding 62.8 percent of global capacity, with South Korea holding the remaining 37.2
AGGRESSIVE STEP: With the new processors, Apple is aiming at the high-end chips Intel has provided for the MacBook Pro and other top-end Macs for about 15 years Apple Inc on Monday took the most aggressive step yet to strip Intel Corp chips from its computers, announcing more powerful homegrown Mac processors alongside a total revamp of its MacBook Pro laptop computers. The company showcased the chips at an event called “Unleashed,” which also included its latest audio products. The new components, called the M1 Pro and M1 Max chips, are 70 percent faster than its M1 predecessors, Apple said. It also unveiled a redesigned MacBook Pro, adding larger screens, MagSafe charging and better resolution. With the new processors and devices, Apple is aiming squarely at the high-end chips that Intel has