Cathay Financial Holding Co (國泰金控) yesterday said it welcomed interest rate hikes by the US Federal Reserve and channeled billions of New Taiwan dollars abroad in the first half of the year to pursue higher yields.
“Our investments have generated higher returns, despite greater market volatility,” said Lin Chao-ting (林昭廷), an executive vice president at Cathay Life Insurance Co (國泰人壽), the flagship unit of Cathay Financial.
The insurer, the nation’s largest by market share, increased stakes in foreign equities by 13.4 percent to NT$387 billion (US$12.57 billion) and foreign bonds by 4.7 percent to NT$3.22 trillion as of the end of June, accounting for 6.8 percent and 56.5 percent of total investment funds respectively, its financial statement showed.
Total investments amounted to NT$5.7 trillion in the first six months, an increase of NT$196.3 billion from a year earlier, it said, adding that almost all flowed to foreign assets.
The strategy paid off as foreign shares generated a 13.4 percent return, higher than the 9.1 percent yield on local shares, it said.
Foreign bonds recorded earnings of 4.7 percent during the same period, also higher than a 3.1 percent profit on local bonds.
The preference for foreign assets prompted Cathay Life to trim holdings of local shares by NT$9 billion and cut positions in domestic bonds by NT$11 billion.
This fell in line with global funds that have flowed from emerging to advanced markets, as the Fed raised its policy rates seven times in the past three years, making US dollar-based assets far more attractive.
Cathay Life’s overall portfolio generated a return of 4.2 percent after factoring in hedging costs, which stood at 1.09 percent in the first half of the year.
Lin said hedging costs should remain at similar levels for the rest of the year.
The insurer also benefitted from cash dividends on local shareholdings, which totaled NT$6.3 billion in the first half and swelled to NT$19.1 billion last month, it said.
The total figure might climb to NT$23 billion for the full year, about the same as last year, Lin said, as most listed firms distributed dividends in the third quarter.
Cathay United Bank (國泰世華銀行) saw its overseas earnings account for 32.2 percent of its total earnings in the first half, significantly lower than the 43.8 percent a year earlier.
The bank attributed the decline to mark-to-market asset losses that mostly disappeared last quarter.
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