There are more reasons behind Moody’s Investors Service’s recent decision to shut down its operations in Taiwan than a mere “review of business strategy” in the wake of weakening global economic and market conditions.
The untold story is the lack of interest foreign investors have in corporate bonds and securitized debts from Taiwanese companies, which has long limited the scale of global ratings agencies’ business in Taiwan and is now forcing Moody’s to close its Taipei office. Moody’s pulling out of the local market is a warning sign for Taiwanese capital markets.
In the face of the global financial crisis, it makes sense that the New York-based company itself is undertaking business restructuring to maximize resource allocation. The question is: Why is Taiwan under the spotlight this time?
Many market watchers said that the Moody’s move reflected the fact that the company was facing a saturated market dominated by rivals Fitch Ratings Ltd and Standard & Poor’s Ratings Service.
But that’s a short-sighted assessment. What these market watchers seemed to miss — as suggested by Polaris Research Institute president Liang Kuo-yuan (梁國源) in an interview with the Central News Agency on Friday — is that the Moody’s withdrawal is indicative of Taiwan’s slower pace in internationalizing its capital markets.
Efforts to internationalize the nation’s capital markets are the best way to develop Taiwan into a regional fundraising hub as the government planned. Therefore, the Moody’s closure rings a warning bell in a country where the government is slow to revise outdated financial regulations and its companies are not interested in developing their global visibility in terms of bond issues.
Another statistic released by S&P’s local partner, Taiwan Ratings Corp, showed how few Taiwanese companies have contracted international ratings agencies to evaluate their corporate credit ratings. It said only around 50 of some 1,200 listed companies in Taiwan have their credit reviews published by ratings agencies on a regular basis.
This figure suggests that nearly 96 percent of Taiwan’s listed companies didn’t feel the need to hire ratings agencies to conduct a credit review of their corporate bonds or securitized debts. There are many reasons behind this, but the simple answer is these companies are just too locally focused and cost-sensitive to do so.
The Moody’s closure also indicates unbalanced development in Taiwan’s capital markets, where the stock market has been growing bigger with the increasing presence of foreign investors, while the bond market still plays a very small role with little interest from investors abroad.
Bonds are generally less attractive than stocks because bond price changes are not as volatile. However, corporate bonds can sometimes show where the economy is headed even more clearly than stocks because bondholders usually pay more attention to a company’s ability to repay its debts. Stock investors, in comparison, are more speculative in attitude and mindset, and so are their forecasts of economic ups and downs.
The withdrawal of Moody’s poses both a crisis and an opportunity for Taiwan’s capital markets. It could be a crisis if people just think of the withdrawal as an isolated incident. It could be an opportunity if the government acts to revise outdated regulations, and local companies become more aware of the importance of internationalizing their debt instruments.
In an article published in Newsweek on Monday last week, President William Lai (賴清德) challenged China to retake territories it lost to Russia in the 19th century rather than invade Taiwan. “If it is really for the sake of territorial integrity, why doesn’t China take back Russia?” Lai asked, referring to territories lost in 1858 and 1860. The territories once made up the two flanks of northern Manchuria. Once ceded to Russia, they became part of the Russian far east. Claims since then have been made that China and Russia settled the disputes in the 1990s through the 2000s and that “China
Trips to the Kenting Peninsula in Pingtung County have dredged up a lot of public debate and furor, with many complaints about how expensive and unreasonable lodging is. Some people even call it a tourist “butchering ground.” Many local business owners stake claims to beach areas by setting up parasols and driving away people who do not rent them. The managing authority for the area — Kenting National Park — has long ignored the issue. Ultimately, this has affected the willingness of domestic travelers to go there, causing tourist numbers to plummet. In 2008, Taiwan opened the door to Chinese tourists and in
Taiwan People’s Party (TPP) Chairman Ko Wen-je (柯文哲) on Thursday was handcuffed and escorted by police to the Taipei Detention Center, after the Taipei District Court ordered that he be detained and held incommunicado for suspected corruption during his tenure as Taipei mayor. The ruling reversed an earlier decision by the same court on Monday last week that ordered Ko’s release without bail. That decision was appealed by prosecutors on Wednesday, leading the High Court to conclude that Ko had been “actively involved” in the alleged corruption and it ordered the district court to hold a second detention hearing. Video clips
Taiwan People’s Party (TPP) Chairman Ko Wen-je’s (柯文哲) arrest is a significant development. He could have become president or vice president on a shared TPP-Chinese Nationalist Party (KMT) ticket and could have stood again in 2028. If he is found guilty, there would be little chance of that, but what of his party? What about the third force in Taiwanese politics? What does this mean for the disenfranchised young people who he attracted, and what does it mean for his ambitious and ideologically fickle right-hand man, TPP caucus leader Huang Kuo-chang (黃國昌)? Ko and Huang have been appealing to that
RSS