Affected by market concerns about local banks’ exposure to Dubai World’s debt woes, the TAIEX closed down 3.21 percent yesterday, the biggest decline since July 13.
The benchmark TAIEX index fell 248.25 points to 7,490.91.
“Selling was heavy, indicating sour investor sentiment. Many of them [investors] fear that Dubai woes could hurt the global financial sector,” Concord Securities (康和證券) analyst Allen Lin said.
“Judging from the expanded turnover, it is fair to say investors were panicking,” Lin said.
Turnover at the Taiwan Stock Exchange was NT$141.12 billion (US$4.37 billion).
The Financial Supervisory Commission’s latest statistics show that the local banking sector has a total lending exposure of NT$6.3 billion (US$194.8 million) to Dubai World, which is seeking to delay payments of US$59 billion in debt, Shiau Chang-ruey (蕭長瑞), deputy director-general of the commission’s banking bureau, said by telephone yesterday, without giving details.
The insurance sector has no exposure to Dubai World, while the investment trust sector has NT$76 million of exposure and the securities sector has NT$1.25 million, the commission said last night.
Cathay United Bank (國泰世華銀行), the banking arm of Cathay Financial Holding Co (國泰金控), appeared to have the biggest exposure to the luxury property builder.
The bank said in a press statement that it had a total of US$28.55 million in syndicated loan exposure, including US$10 million in lending to Dubai World, a loan of US$9.98 million to its affiliate DP World Ltd and another US$8.57 million loan to affiliate Nakheel.
Cathay United said it expected the impact on its finances to be limited because it had a healthy coverage ratio.
In addition, the bank had an exposure of US$3.5 billion in senior bonds issued by state-owned Emirates Bank International, which was assigned an A-minus rating by Standard & Poor’s on a negative outlook, it said.
First Commercial Bank (第一銀行), the banking arm of First Financial Holding Co (第一金控), said it had US$25 million in syndicated loans to the property company.
“Our outlet there will soon negotiate with the company to see if it is seeking a rollover or an extension,” an executive at the company’s department of investor relations, who refused to be identified, said by telephone yesterday.
Chinatrust Commercial Bank (中信銀), a subsidiary of Chinatrust Financial Holding Co (中信金控), yesterday reported US$12.9 million in loan exposure, a bank executive said.
A report by Citigroup Global Markets showed that Mega International Commercial Bank (兆豐國際商銀) and Taishin Financial Holding Co (台新金控) had exposures of up to NT$1 billion and US$15 million respectively, while Bank SinoPac (永豐銀行) had a US$40 million exposure to the United Arab Emirates (UAE).
Hua Nan Financial Holdings Co (華南金控) also reported an exposure of US$10 million yesterday, while Bank of Taiwan (台灣銀行) said its exposure may be several million US dollars.
Analysts said they believed the total exposure of the nation’s financial institutions to Dubai World should be minimal, although any defaults would hit their already thin profits this year.
“So far, the impact on domestic financial institutions should be limited because only large banks in Taiwan were capable of tapping into the Middle East market,” said Eva Chou (周怡華), a financial analyst at the Taiwan Ratings Corp (中華信評), a local arm of Standard & Poor’s Ratings Services.
“These large banks have the financial reources to absorb any sour loans,” she said.
Citigroup analysts yesterday said in a note to clients that so far the nation’s exposure was not worrying, although the impact on earnings may be more significant for some banks because their capital adequacy ratios are not as wide.
Citigroup, however, remained cautious in the initial stages because many banks haven’t revealed their exposure, the report said.
ADDITIONAL REPORTING BY AFP
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