The earnings momentum of Taiwanese securities companies is expected to remain strong this year after posting a solid recovery last year, Fitch Ratings said in a report yesterday.
The sector’s aggregate net profit increased 77.41 percent year-on-year to NT$68.71 billion (US$2.12 billion) last year, following a 63.27 percent decline the previous year, while return on equity rose to 10.9 percent last year from 6.1 percent in 2022, Taiwan Stock Exchange data showed.
Fitch attributed the sector’s stellar performance last year to improved capital market sentiment, supported by the slowdown in US interest rate hikes and buoyant investor interest in technology stocks, especially in artificial intelligence-related equities.
Photo: CNA
Higher brokerage and investment banking income, as well as an improvement in underwriting activities also contributed to the sector’s earnings recovery last year, the agency said.
The sector’s low use of leverage and increasing risk control would help domestic securities firms navigate high market volatility this year, Fitch added.
“Fitch expects the sector’s earnings strength to persist in 2024, supported by strong corporate financing demand, consistent trading performance based on positive domestic equity market sentiment, and potential further revaluation gains in fixed income securities on the back of tapering US dollar interest rates,” the agency said.
While global economic and geopolitical uncertainties could still weigh on investor sentiment and brokerage revenues, the domestic equity market has been robust this year, with average daily turnover increasing 20 percent from the previous year, Fitch said.
The TAIEX rose 148.87 points, or 0.72 percent, at 20,857.71 yesterday, the highest closing level, exchange data showed. The benchmark index has advanced 15.49 percent so far this year, the best in Asia.
Fitch said the sector would continue to gain support from robust investment banking demand, and underwriting services would benefit from continued supply chain relocation and a rise in capital expenditure due to the need for production improvements to comply with environmental, social and governance regulations.
As securities companies are expanding wealth management services with a special focus on overseas equity and fixed income product sales, revenue generated from this line of business is expected to see marked growth this year, Fitch said.
The improvement would be more pronounced among larger brokerages that are equipped with better information technology platforms and resources, the agency added.
Taiwan’s top 10 securities brokerages maintained their dominance in the sector, accounting for 70 percent of the overall profit last year, thanks also to their low leverage and robust risk-management infrastructure that help manage market volatility, Fitch said.
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