This year has been unfortunate for the shareholders of the nation’s listed financial companies, as a spate of negative developments has worsened already gloomy market sentiment. On one hand, rising inflation worldwide and aggressive interest rate hikes by central banks have led to a persistent wealth crunch, with the TAIEX dropping from 18,000 points early this year to about 13,000 points in recent sessions. On the other hand, the financial industry’s exposure to Russia and Credit Suisse Group AG has come under scrutiny following the Russian invasion of Ukraine in February and recent financial troubles at the Swiss lender.
Last week, the nation’s financial regulator said that it has put Credit Suisse on its watchlist and is closely monitoring sales of the bank’s financial products in Taiwan. According to the Financial Supervisory Commission, more than 70 percent of local banks have stopped selling bonds or structured notes issued by Credit Suisse, after some investors rushed to redeem financial products issued by the bank due to concern that the Swiss lender’s woes would impact global financial markets, akin to the collapse of US investment bank Lehman Brothers Holdings Inc in 2008.
However, what has hurt the domestic financial industry most this year has been the substantial payments on insurance companies’ COVID-19 pandemic insurance policies, following a severe outbreak in the first half of this year. Some insurance companies posted huge net losses in the first half, and the losses are expected to widen for the full year as still-sizable pandemic policies remain.
The nation’s 15 financial holding companies reported a combined net profit of NT$14 billion (US$439.1 million) last month, dropping by half from the previous month and down 66.37 percent from a year earlier. In the first nine months of the year, the companies’ combined net profit totaled NT$321.21 billion, down 35.66 percent year-on-year. Among them, Cathay Financial Holding Co, Shin Kong Financial Holding Co and Taishin Financial Holding Co were the worst performers, reporting profit declines of more than 50 percent year-on-year over the nine-month period.
Unlike last year, when the 15 financial holding companies generated a combined net profit of NT$580.63 billion, the highest on record, this year has ushered in a series of challenges and surprises for the firms: the sale of COVID-19 insurance policies, the US Federal Reserve’s aggressive rate hikes and increasing risks to Credit Suisse’s financial profile.
Entering the fourth quarter, market sentiment remains cautious and conservative, as there has not been an end to interest rate hikes and insurance companies still find it difficult to realize capital gains in the current investment environment.
The Credit Suisse incident might be the tip of the iceberg amid the recent wave of interest rate hikes and market volatility, as there could be problems at other financial institutions that are yet to surface. Investors must pay attention to whether other financial institutions or “zombie companies” become unsustainable.
A strong US dollar is wreaking havoc on emerging markets. With continued capital outflows and market routs, a debt crisis could be next for those economies as the threat of soaring refinancing costs and another round of liquidity woes increases.
As Taiwan’s financial institutions also have exposure to certain emerging markets, they must implement risk controls to minimize potential losses, while investors need to observe follow-up risks with an exit strategy at hand.
Father’s Day, as celebrated around the world, has its roots in the early 20th century US. In 1910, the state of Washington marked the world’s first official Father’s Day. Later, in 1972, then-US president Richard Nixon signed a proclamation establishing the third Sunday of June as a national holiday honoring fathers. Many countries have since followed suit, adopting the same date. In Taiwan, the celebration takes a different form — both in timing and meaning. Taiwan’s Father’s Day falls on Aug. 8, a date chosen not for historical events, but for the beauty of language. In Mandarin, “eight eight” is pronounced
Having lived through former British prime minister Boris Johnson’s tumultuous and scandal-ridden administration, the last place I had expected to come face-to-face with “Mr Brexit” was in a hotel ballroom in Taipei. Should I have been so surprised? Over the past few years, Taiwan has unfortunately become the destination of choice for washed-up Western politicians to turn up long after their political careers have ended, making grandiose speeches in exchange for extraordinarily large paychecks far exceeding the annual salary of all but the wealthiest of Taiwan’s business tycoons. Taiwan’s pursuit of bygone politicians with little to no influence in their home
In a recent essay, “How Taiwan Lost Trump,” a former adviser to US President Donald Trump, Christian Whiton, accuses Taiwan of diplomatic incompetence — claiming Taipei failed to reach out to Trump, botched trade negotiations and mishandled its defense posture. Whiton’s narrative overlooks a fundamental truth: Taiwan was never in a position to “win” Trump’s favor in the first place. The playing field was asymmetrical from the outset, dominated by a transactional US president on one side and the looming threat of Chinese coercion on the other. From the outset of his second term, which began in January, Trump reaffirmed his
Despite calls to the contrary from their respective powerful neighbors, Taiwan and Somaliland continue to expand their relationship, endowing it with important new prospects. Fitting into this bigger picture is the historic Coast Guard Cooperation Agreement signed last month. The common goal is to move the already strong bilateral relationship toward operational cooperation, with significant and tangible mutual benefits to be observed. Essentially, the new agreement commits the parties to a course of conduct that is expressed in three fundamental activities: cooperation, intelligence sharing and technology transfer. This reflects the desire — shared by both nations — to achieve strategic results within
RSS