Cathay Financial Holding Co (國泰金控) asked the central bank to raise interest rates next year, as the widening interest-rate differential between Taiwan and the US has increased the firm’s foreign-exchange (forex) hedging costs, president Lee Chang-ken (李長庚) said on the sidelines of an event in Taipei on Monday.
Since the US Federal Reserve is expected to continue rate hikes next month and into next year, the differential between the New Taiwan dollar and the US dollar will widen further, Lee said.
As the price of a forex swap agreement — a kind of contract that insurers use to hedge their positions — is determined by the interest-rate differential between the two currencies, when the differential expands, insurers have to bear higher costs, Lee said.
“So far we have been doing well in terms of hedging, but the costs are really high,” Lee said.
Based on Financial Supervisory Commission regulations, insurance companies are allowed to hold a special reserve to absorb forex losses on overseas investments in response to volatile global financial markets.
Lee said he is considering expanding the company’s special reserve to better manage forex risks and reduce hedging costs.
Local life insurers reported a combined NT$507.5 billion (US$16.42 billion) in hedging costs during the first 10 months of the year, with forex losses totaling NT$178.2 billion over the same period, the commission said last week.
Net forex losses this year might exceed NT$200 billion, which would be a record, it said.
The central bank has not changed its key interest rates since September 2016. However, there are too many funds with a lack of good investment targets, so demand for funds is not strong.
With interest rates remaining low, it has not only posed challenges for insurance companies, but also taken its toll on people who rely on interest income after retirement, Lee said.
Lee said he understands that Taiwan does not have much room for interest-rate hikes, but an increase of 0.25 percentage points would benefit such retirees, he added.
Cathay Financial is also looking for good targets to invest domestically, as they would pose no forex risks, Lee said.
Possible targets are related to the “five plus two” innovative industries or other start-ups, but the company would not invest in offshore wind farms, as it cannot fully understand the risks, he said.
Japanese technology giant Softbank Group Corp said Tuesday it has sold its stake in Nvidia Corp, raising US$5.8 billion to pour into other investments. It also reported its profit nearly tripled in the first half of this fiscal year from a year earlier. Tokyo-based Softbank said it sold the stake in Silicon Vally-based Nvidia last month, a move that reflects its shift in focus to OpenAI, owner of the artificial intelligence (AI) chatbot ChatGPT. Softbank reported its profit in the April-to-September period soared to about 2.5 trillion yen (about US$13 billion). Its sales for the six month period rose 7.7 percent year-on-year
CRESTING WAVE: Companies are still buying in, but the shivers in the market could be the first signs that the AI wave has peaked and the collapse is upon the world Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported a new monthly record of NT$367.47 billion (US$11.85 billion) in consolidated sales for last month thanks to global demand for artificial intelligence (AI) applications. Last month’s figure represented 16.9 percent annual growth, the slowest pace since February last year. On a monthly basis, sales rose 11 percent. Cumulative sales in the first 10 months of the year grew 33.8 percent year-on-year to NT$3.13 trillion, a record for the same period in the company’s history. However, the slowing growth in monthly sales last month highlights uncertainty over the sustainability of the AI boom even as
AI BOOST: Next year, the cloud and networking product business is expected to remain a key revenue pillar for the company, Hon Hai chairman Young Liu said Manufacturing giant Hon Hai Precision Industry Co (鴻海精密) yesterday posted its best third-quarter profit in the company’s history, backed by strong demand for artificial intelligence (AI) servers. Net profit expanded 17 percent annually to NT$57.67 billion (US$1.86 billion) from NT$44.36 billion, the company said. On a quarterly basis, net profit soared 30 percent from NT$44.36 billion, it said. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said earnings per share expanded to NT$4.15 from NT$3.55 a year earlier and NT$3.19 in the second quarter. Gross margin improved to 6.35 percent,
BUST FEARS: While a KMT legislator asked if an AI bubble could affect Taiwan, the DGBAS minister said the sector appears on track to continue growing The local property market has cooled down moderately following a series of credit control measures designed to contain speculation, the central bank said yesterday, while remaining tight-lipped about potential rule relaxations. Lawmakers in a meeting of the legislature’s Finance Committee voiced concerns to central bank officials that the credit control measures have adversely affected the government’s tax income and small and medium-sized property developers, with limited positive effects. Housing prices have been climbing since 2016, even when the central bank imposed its first set of control measures in 2020, Chinese Nationalist Party (KMT) Legislator Lo Ting-wei (羅廷瑋) said. “Since the second half of
RSS