| Prime News | | ![]() | ![]() | Chunghwa Telecom to Buy Treasury Stocks for Capital Write-Off
Taipei, Aug. 29, 2007 (CENS)--The board of directors of Chunghwa Telecom, Taiwan's leading telecom carrier, resolved yesterday (Aug. 28) to purchase 250,000,000 shares of treasury stocks, costing around NT$13.7 billion, for use in capital write-off.
The move is part of the company's efforts in boosting the utilization efficiency of its tremendous cash holding, which also include setup of a property development firm next year, investment in the financial sector, and overseas investments, Hsieh Chien-ping, the company's chief financial officer, reported yesterday.
The scale of the treasury-stock purchase is equivalent to 2.35% of the company's paid-in capital, which will be carried out in the next two months at price range of NT$38-85 per share. The company's share price slipped NT$0.4 closing at NT$54.8 yesterday.
This is the second treasury-stock purchase by the company, following purchase of 192,000,000 shares costing NT$11.3 billion for write-off of 1.99% of its capital in the first half last year.
In addition to the treasury-stock purchase, the company will also carry out 10% capital reduction in the near future, thereby lowering its capital to NT$94 billion.
Hsieh Chien-ping reported that to better utilize its idle fund, Chunghwa will appropriate NT$20 billion for various investment projects in the next five years, both in Taiwan and abroad. The company, for instance, will set up a US$200 million fund entrusting two financial institutions, to be selected publicly, to invest in foreign financial products. The company appropriated NT$100 million for such discretionary-account operation by Sinopa, under the HSBC group, last year, which has generated 7% of returns.
Chunghwa's board of directors resolved yesterday to establish a property development firm, with NT$5 billion of capital, responsible for development of huge land in the company's possession, totaling 410 hectares in space, whose value was assessed at NT$150 billion in 2002. One tenth of land can be developed directly, without need of rezoning. The company intends to utilize its land for building smart buildings, in line with its development of fiber-optic broadband networks.
In view of the advantage of its rivals, such as Taiwan Mobile and Far Eastone, deriving from backing of their parent financial holding firms and successful involvement of some foreign telecom carriers in the financial sector, such as NTT DoCoMo, Chunghwa Telecom is also setting sight at the financial sector. It, for instance, may set up a credit-card firm, converting its 8 million mobile-phone subscribers into credit-card holders, using their mobile phones as a payment instrument, according to Hsieh Chien-ping.
Another plan on the drawing board is investments in telecom infrastructure in Indochinese countries, featuring tremendous untapped market potential, such as Vietnam, Cambodia, and Myanmar.
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| | ![]() | | | Taipei City Government Issues First Land-Right Rental-Based Securities
Taipei, Aug. 29, 2007 (CENS)--The Taipei city government is scheduled to issue land-right rental-based securities totaling NT$1.8 billion in scale tomorrow (Aug. 30), backed by four city government-owned plots in downtown Xinyi area, the first government-issued assets-based securities using government's land-right rental as collateral.
Land rights of the four plots have been leased to several noted enterprises, including Shin Kong Mitsukoshi Department Store, Shin Kong Life Insurance, Far Eastern Department Store, and Kelti Group, a direct-sales firm, and are expected to generate steady rental income for the city government, which further pledges to pay the interests to securities holders should the rental income fail to be realized, virtually making the product risk-free.
With a face value of NT$50 million per sheet, the securities, with a 10-year term, though, bear only annual interest rate of 2.2%, but financial bureau of the city government noted that the interest income is subject to separate tax of 6%, giving high-income people tax-saving benefit.
The securities issuance is commissioned to First Bank, with Taiwan Ratings serving as the rating agency and Polaris Securities as the underwriter. The NT$1.8 billion fund raised from the issuance will be used to finance the building of city sports center, information building, and last-batch payment for the Maokung cable-car system.
Since its inception in 2002, outstanding scale of the local assets-based securities market has topped NT$308.7 billion, which is expected to grow over 20% in 2007. In August, Chailease Finance, for instance, issued the first leasing and accounts receivable-based securities, underwritten by Taiwan Industrial Bank and HSBC jointly, using the company's leased equipment and accounts receivable as collateral.
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| | ![]() | | | FPC to Acquire 25% Stake in Fushin Specialty Steel for NT$1.65 B.
Taipei, Aug. 29, 2007 (CENS)--At a recently held board meeting, Formosa Plastics Corp. (FPC), the flagship of the Formosa Plastics Group, passed a proposal to set aside US$50 million, or NT$1.65 billion, to acquire 25% stake in Fujian province-based Fushin Specialty Steel Co. of mainland China.
Including the share acquired by Formosa Heavy Industries Corp., the FPG will have obtained half of the Fushin Specialty Steel, with the remainder going to Fujian province-based Sankang Group and other mainland-based firms.
Fushin Specialty Steel will set up a NT$32 billion (US$972.64 million) stainless-steel plant with designed production capacity reaching 720,000 metric tons. Ground breaking for the plant will take place the end of this year and begin mass production in three years at the earliest.
It is anticipated that participation by the FPG will lead to a war in the Asian stainless-steel market.
An FPC executive said that the investments in Fushin Specialty Steel will be launched by the Samoa-based Tienlung Co., which is a 50-50 joint venture between FPC and Formosa Heavy Industry. FPC and Formosa Heavy Industry will submit the application to invest in Fushin Specialty Steel with the Investment Commission under the Ministry of Economic Affairs.
To cope with the prospective investment projects, FPC has recently issued NT$5 billion (US$151.97 million) in unsecured corporate bonds several times within a five year span.
It has been a long-term goal for FPG to tap the iron and steel industry. FPG founder Y.C. Wang said that iron and steel and petrochemical industries are the basic foundations for a nation. After achieving success in the petrochemical industry, FPG will set sights on engaging in iron and steel industry.
Earlier FPG had planned to set up a large-sized steel mill in Yunlin County of central Taiwan but the entire plan is still stuck in the mandatory environment impact assessment stage.
Originally Fushin Specialty Steel was a joint venture between Taiwan's Chien Shing Stainless Steel Co. and mainland's Sankang Group. In April Fushin obtained approval from mainland's National Development and Reform Commission for setting up a stainless steel plant. With Chien Shing having withdrawn from the investment project, FPG has emerged to take its place.
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| | ![]() | | | Taiwan's Life Insurers Earn NT$50.4 B. in First 6 Months
Taipei, Aug. 29, 2007 (CENS)--The 29 life insurers operating in Taiwan scored NT$50.4 billion (US$1.53 billion at US$1:NT$32.9) in pretax earnings in the first half of this year, up 276% year-on-year from NT$13.4 billion (US$407.29 million) and hitting a historic high, according to statistics compiled by the Taiwan Insurance Institute (TII).
The TII predicted that domestic life-insurance industry will be able to challenge the historic high of NT$51.3 billion (US$1.56 billion) in pretax earnings, which was achieved in 2003, this year if domestic bourse continues to rally.
The life-insurance industry's investment in domestic bourse reached NT$614.4 billion (US$18.67 billion) at the end of June, hitting the highest record in history. The industry increased investments by NT$22.6 billion (US$686.93 million) in domestic stock market in May and June.
Over the past several years, almost one third of life-insurance companies posted gains with the remaining two thirds encountering operating losses. But since the beginning of this year, most life insurers have been posting gains because of financial operations and only the newly established foreign-owned ones and those making business expansions were in the red.
The TII's tallies showed the top-ranking life insurers, including Cathay Life Insurance Co., Shin Kong Life Insurance Co., Taiwan Life Insurance Co., Fubon Life Insurance Co., China Life Insurance Co. and Nan Shan Life Insurance Co., posted earnings of NT$35.5 billion (US$1.07 billion) with others posting combined net earnings of NT$15 billion (US$455.92 million), in the first half of this year.
Many profitable life insurers attributed their earnings in the first half of this year to the increased investments in domestic stock and real estate markets. Domestic life insurance companies increased investments to NT$131.7 billion (US$4 billion) in domestic bourse in the first half of this year. While Cathay Life reduced NT$15.6 billion (US$474.16 million) in investments in domestic stocks in the second quarter of this year, with others still increasing investments in the stock market in May and June.
The TII noted that domestic life-insurance industry invested NT$614.42 billion (US$18.67 billion) in domestic stock market at the end of June, accounting for 8.53% of the total insurance funds of NT$7.2 trillion (US$281.84 billion) and hitting a historic high.
The TII believed that the life-insurance sector would see increase in earnings and decrease in investments in domestic bourse in July because some have cashed in gains from stock investments that month to avoid possible large corrections in domestic stock market.
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| | ![]() | | | Asustek Steps Up Brand-Name Operation in Global Notebook Market
Taipei, Aug. 29, 2007 (CENS)--Asustek Computer Inc. will introduce its Eee-branded notebook computer next month as part of its plan to speed up its brand-name operation in global notebook-computer market.
Asustek Chairman Johnney Shih recently stressed that Eee computers will target global market for low-priced notebook computers and his company will promote the brand in earnest as soon as it splits with its contract-manufacturing operations.
The company first debuted Eee PC 701 at the Computex Taipei trade show held in early June this year. The computer, measuring 22.5cm by 16.5cm by 2.1-3.5cm and weighing only 0.89 grams, has a 4-gigabyte, a 6-gigabyte or a 16-gigabyte flash memory card.
The company markets the system as a low-cost ultra portable PC device. Strip-down type of the computer goes for S$199 whereas full-feature types are priced US$249-299.
"Eee" stands for "easy to learn," "easy to work" and "easy to play," so the target market consists of inexperienced users, the company's executives said. The company defined Eee as a killer application and estimated it to threat Intel's ultra mobile PC and the One Laptop Per Child (OLPC) computers co-developed by Quanta Computer and Massachusetts Institute of Technology (MIT).
Asustek aims to ship 300,000 units of Eee by the end of this year after beginning volume production in July and one million systems by the first quarter next year. To achieve this goal, the company is buying more Intel's components for its Eee. Although Eee uses Intel's microprocessors and other key components, the computer is built around Asustek's unique platform.
The company mobilized over 1,000 engineers to develop the low-priced notebook computer.
The computer has caught eye of Stain Shih, the founder of Acer Inc., who commented that Eee is a good solution to narrow the digital divide. Asustek's Shih said his company will fully support the other Shih's idea.
Asustek's Shih stressed that Eee will go to developed markets in addition to developing markets.
Asustek announced early last month that it will part with its two contract-manufacturing operation and reorganize the two operations into two independent companies, with the separation taking effect on Jan. 1, 2008. Asustek will fully own the two contract manufacturers.
Shih noted that the separation will help end the conflict of interest between the company's brand-name and contract-manufacturing operations. He said many of the company's contract buyers had become reluctant to place outsourcing orders since Asustek began promoting brand names.
Shih believed that his company's brand-name operation will go smoothly after parting with its contract-manufacturing operation. His company has set goal of delivering over 10 million brand-name computers including Eee throughout next year and eclipse Acer in two years.
The parent company will have net value of only NT$58 billion (US$1.7 billion) after the split, down from NT$140 billion (US$4.2 billion). The two affiliates will have a combined value of NT$82 billion (US$2.4 billion).
Shih projected that his company would rake in revenue of NT$750-800 billion (US$22.7-24 billion) this year, up from last year's NT$600 billion (US$18 billion).
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| | ![]() | | | Motech Opens U.S. Office to Stake Out Market Position
Taipei, Aug. 29, 2007 (CENS)--Motech Industries Inc., currently Taiwan's No.1 solar-cell maker, recently announced that it will open an office in Colorado of the United States as first step to jostle for a position in the U.S. solar-cell market before competition starts there.
Taiwanese industry watchers said that the United States will emerge as another promising market for solar energy after Europe. Many manufacturers have begun building presences in stateside. Motech is the first Taiwanese solar-cell maker to open office there.
California has recently begun pushing a high-profile solar-energy plan, which has inspired other states to follow suit. The moves are expected to create huge demands for various solar-energy products in the United States.
Last year, Motech put money into U.S. poly-silicon maker AE Polysilicon for a 10% stake. The U.S. material maker will begin supplying the material to Motech next year.
Motech will put the office under stewardship of Tom Surek, a former official at U.S. National Renewable Energy Laboratory (NREL), who used to work with Motech's president, Y.H.Tso, in U.S.
The potential U.S. market has also driven E-Tone Tech, another Taiwanese solar-cell maker, to build strong presence there. The company has opened solar-energy venture Gloria Spire Solar in U.S. with Spire Corp. through its affiliate Gloria Solar to shoot for U.S. market of solar-system products, which is estimated to fetch lucrative gross margin of over 30%. In addition, E-Tone has wholly acquired U.S. silicon-wafer manufacturer Adema to complete its presence in upstream and downstream sectors of the industry.
Gloria is a joint venture of carmaker Yulon Motor and computer maker Acer Group. The company puts out 20 megawatts of solar-cell modules a year. The joint venture has projected to have revenue of US$20 million for this year.
Photonics Industry & Technology Development Association (PIDA), a Taiwanese market research organization tracking optoelectronics market, projected Taiwan's solar-cell and module sectors to generate revenue exceeding NT$50 billion (US$1.5 billion at US$1:NT$33) this year from last year's NT$10 billion (US$303 million) due to expanded supply.
PIDA said that Taiwan's solar-cell sector has grown rapidly and effectively integrated the supply chain of crystalline silicones, enabling the number of suppliers and production capacity in the sector to increase steadily.
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| | ![]() | | | Camera-based Vehicle Safety Systems to Create Lucrative Biz: ABI Research
Taipei, Aug. 29, 2007 (CENS)--A recent study by ABI Research showed that camera-based safety systems that try to deter vehicle accidents would have a market value well in excess of US$100 million by 2012, generating lucrative business opportunities and attracting major global tier-one auto-parts suppliers to jump on the bandwagon, such as Bosch, Visteon, Continental, Hella, Iterirs, Valeo, etc.
ABI Research maintains global operations supporting annual research programs, intelligence services, and market reports related to broadband and multimedia.
Taiwan companies, as a result, are expected to win increasing original equipment manufacturing (OEM) orders from the global tier-ones and automakers due mainly to their strong cost-control ability and superior manufacturing.
Industry sources said that a group of local players are expected to win increasing foreign contract orders for automotive imaging/monitoring system products, including Mobiletron Electronics Co., Ltd., Creative Sensor Inc., Lite-On Technology Corp., Hi Sharp Electronics Co., Ltd., Tung Thih Enterprise Co., Ltd. (TTE), etc.
Mobiletron has been actively developing new products related to automobile safety, including tire pressure monitoring systems (TPMS), integrated multimedia rearview mirror, back-up sensing system, image-sensing system, security system, charge coupling device (CCD) camera products, etc.
A recent study by ABI Research regarding camera-based automotive systems pointed out that obstacle detection is a very important part of such systems, which also covers driver monitoring and occupant detection. Warning the driver of visible signs of fatigue is as significant as identifying a potential collision, the study said, because until OEMs are confident that the reliability of these systems has grown to the point that the vehicle can take evasive action, the driver is still in total control.
"Acknowledgment of the inherent flaws in human beings has led automobile manufacturers and suppliers to develop new technologies that can save drivers from themselves," says principal analyst David Alexander of ABI Research. "Systems that can analyze road situations and provide additional warnings to drivers have started to appear in newer car models, and the camera is at the heart of many of them."
Keeping cost down is critical to consumer acceptance, said the principal analyst, and indications are that the newest machine vision technology will make these advanced safety features affordable for all.
"Having the car look out for other vehicles and track the road ahead is one major area of current development," added Alexander, "but watching the driver and passengers is another very important camera-based application that is beginning to emerge." Occupant detection and monitoring allows "smart" automobiles to customize airbag deployment to the size and position of the passengers. As this technology advances there will be additional safety and comfort capabilities added.
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| | ![]() | | | Tong Yang, Taiwan Kai Yih Report Lucrative July Results
Taipei, Aug. 29, 2007 (CENS)--Two companies of Taiwan's Tong Yang Group, one of the largest auto-parts manufacturing conglomerates in Taiwan, reported lucrative operation results for July.
Many major local aftermarket (AM) auto-parts makers pointed out that the recovering demands from North America market and the rising European demand (as a result of local companies' strenuous efforts in market development) have helped to buoy local AM parts suppliers' operation performances. In addition, they added, the positive effects of the mold-consolidation projects between local AM sheet-metal body parts suppliers are expected to gradually generate increasing profits for the participants.
Tong Yang Industrial Co., Ltd., the world's largest maker of AM plastic-injection parts and flagship firm of the group, reported pretax earnings of NT$75.7 million (US$2.29 million at US$1: NT$33) in July, up 8.35% from a year earlier, and accumulated January-July pretax earnings of NT$682 million (US$20.67 million), up 43.11% and a new three-year high.
Taiwan Kai Yih Industrial Co., Ltd., a major AM sheet-metal body-parts manufacturer, reported pretax earnings for July of NT$18.36 million (US$556,363), up 330.64% from the same period of last year, and accumulated earnings in the first seven months of NT$87.07 million (US$2.64 million), up 352.66%.
Raymond Wu, Tong Yong president, said that Tong Yang Industrial would install four additional plastic-injection lines at its plant in Taiwan, increasing its annual capacity to 624,000 bumper covers. While the company's new big and modern parts warehouse and 34 cargo-truck loading dock is expected to be completed in early 2008 to effectively overcome its supply deficiency.
In addition, the president added, Tong Yang group's mainland Chinese investments have turned profitable in the first half with a total earnings of NT$20.59 million (US$623,929) from last year's loss. Tong Yang now runs 16 subsidiaries and joint ventures in China, most of which focus on original equipment (OE) parts supply to automakers there, and the group expects increasingly profitable operations across the Taiwan Strait after intensive deployments in the past 10 years.
Simon Chen, president of Taiwan Kai Yih, said that his company has completed the installment of a new automotive fender stamping line, which is expected to upgrade the firm's capacity by 34% in the third quarter. Kai Yih plans to pour about NT$400 million (US$12.12 million) in new product development so as to keep diversifying the firm's product line.
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| | ![]() | | | Taiwan's Jobless Rate Hit 11-Month High of 4.03% in July
Taipei, Aug. 29, 2007 (CENS)--Infused with fresh graduates looking for jobs, Taiwan's jobless rate inched up 0.07 of a percentage point from a month earlier to 4.03% in July, the highest in 11 months. However, compared to the same month of last year, the rate edged down by 0.02 of a percentage point, the lowest of its kind in seven years, according to the statistics released by the Cabinet-level Directorate General of Budget, Accounting & Statistics (DGBAS).
Actually the jobless rate in July, after seasonal adjustment, should be 3.87%, representing a minimal annual drop of 0.01 of a percentage point and also the lowest of its kind in seven years. In the same month, the unemployed with above-college educational level reached 106,000 persons, increasing 20,000 persons from a month earlier and translating into the highest jobless rate of 4.7% among the groups based on educational levels.
In July the employed population witnessed a monthly increase of 59,000 persons to reach 10.321 million persons. A senior official at DGBAS indicated that the traditional industries, including textile, plastics, construction, cement, and steel & iron, continued to recruit workers during the month to meet the strong market demand incurred by the upcoming 2008 Beijing Summer Olympic Games to be held across the Taiwan Strait.
In the first half of the year, the average basic monthly pay grew 1.53% to NT$36,530 (US$1,107) and the growth was the highest of its kind in seven years. Relatively speaking, workers in transportation, warehousing, telecommunication, finance, and insurance sectors were better paid.
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| | ![]() | | | Taiwan Ranks World's No. 6 in Investment Risk in 2007: BERI
Taipei, Aug. 29, 2007 (CENS)--The global ranking of Taiwan's overall investment climate drops one notch from a year earlier to 6th in 2007, according to the "Investment Environment Risk Evaluation" recently published by the U.S.-based Business Environment Risk Intelligence (BERI).
Every year BERI evaluates 50 major economies worldwide in terms of risk in investment environment and this year Taiwan comes in sixth place with a score of 72 points, next to Switzerland, Singapore, Holland, Japan, and Norway. BERI's evaluations are based on operations risk index, political risk index, and remittance risk index.
Taiwan's political risk index this year hit a historical low of 59 points and is ranked 15th place, which is believed to reflect the island's political uncertainty due to the upcoming legislative and Presidential elections to be held respectively in January and March of 2008.
BERI predicted that Taiwan's investment environment would improve in the next five years, yet its ranking would remain unchanged at 6th during such period since most of the world's leading economies would also keep upgrading.
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| | ![]() | | | Kolin Hits North American Market With Olevia-branded LCD TVs
Taipei, August 29, 2007 (CENS)--Kolin Inc., a Taiwanese maker of household electronics, has hit the North American market with its Olevia-braned liquid crystal display (LCD) TVs, ranking as the seventh-largest LCD TV brand in shipment in that market in the second quarter of this year, according to statistics compiled by iSuppli.
In addition, Olevia, a joint brand between Kolin and its sales arm, the U.S.-based Syntax-Brillian Corporation, is trailing the six-largest brand, Sony, by a margin of only 0.2% in market share following the second quarter.
James Li, president of Syntax-Brillian, commented that Olevia commanded a 6.1% share in shipment as the No. 7 brand in the North American market for LCD TVs in the second quarter, with 37-inch models accounting for the largest portion of its total shipment.
He added that the brand posted shipment of some 256,000 units of 19-inch and above LCD TVs, including 37-, 32- and 42-inchd models, in the market in the quarter, with Syntax-Brillian taking charge of branding and marketing and Kolin developing and manufacturing.
Noteworthy is that Taiwanese makers of LCD TVs are gradually building an integrated supply chain, including supplies of display panels, printed circuit boards, components and power supplies, in the sector on the island, emphasized Li. This allows them to manufacture LCD TVs domestically without outsourcing any parts from foreign suppliers, as well as helping some to develop own brands in the global market.
Kolin already has doubled its shipment projection of LCD TVs to 1.2 million units for this year from 600,000 units posted last year, and targets the U.S. as its major export market. So far, the company has shipped 520,000 units over past seven months of this year and is on schedule, said Frank Li, president of Kolin.
According to the latest report issued by iSuppli, the nine most popular LCD TV brands in the U.S. market in the second quarter of this year included Vizio, Samsung, SHARP, Philips, LG, Sony, Olevia, Westinghouse and Panasonic, in descending order.
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| | ![]() | | | Taiwan's Connector Makers Do Well in 1st Half of This Year
Taipei, August 29, 2007 (CENS)--Taiwanese suppliers of connectors reported considerable profits in the first half of this year, with Wanshih Electronic Co., Ltd. scoring earnings of NT$2.88 per share, Chant Sincere Co., Ltd. NT$2.69, and Cvilux Corporation NT$2.27, according to company sources.
After completing building a plant in mainland China, Wanshih optimistically projected its sales revenue from the plant to double to 150 million renminbi next year from 70 million renminbi posted this year. Such development makes the company strongly poised to continue to do well in next two years.
Wanshih raked in profits of more than NT$90 million in the second quarter of this year, up 50% from a quarter earlier, and net earnings of NT$155 million, or NT$2.88 per share, for the first half of the year, sharply growing 234% from a year earlier and leading the industry.
With solid sales of its wireless antennas driving up its sales and profits to new highs in second quarter of this year, Chant Sincere reported net profits of NT$181 million, or NT$2.69 per share, for the first half of this year, for a growth of 118% from a year earlier. In fact, Wanshih and Chant Sincere are the two top performers posting the strongest growth in sales in the quarter in the sector.
In addition to information appliances (IAs), Chant Sincere has joined supply chains of industries making notebook PCs, mobile phones and liquid crystal display (LCD) TVs with its wireless antennas, and therefore recorded a single-quarter high of NT$516 million in sales revenue for the second quarter of the year.
The company is expected to score sales of not less than NT$600 million for the third quarter to rack up commendable profits in the second half of this year, an improvement over that posted in the first half, according to institutional investors.
Coincidentally, with the domestic market for LCD TVs turning around in the second quarter of this year to gradually boost demand for large-sized TV display panels, Cvilux, Taiwan's largest supplier of connectors for inverters in LCD TVs, scored combined revenue of NT$136 million to beat a historical high in July and net profits of NT$113 million, or NT$2.27 per share, for the first half of the year, in addition to the corresponding figure of NT$63 million, or NT$1.24 per share, posted in the second quarter.
Furthermore, as Taiwan's two big suppliers of inverters, namely Darfon Electronics Corp. and Logah Technology Corp., witness their sales increase month by month in the second half of the year, Cvilux has taken on 80% of Darfon's orders for connectors and more than 50% of Logah's.
Thanks to increasing orders from Darfon and Logah, Cvilux is expected to challenge profits up to NT$80 million, or NT$1.5 per share, for the third quarter alone, according to institutional investors.
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| | ![]() | | | Foreign Banks Undermine Taiwanese Banks, at Home and Abroad
By JUDY LI
The acquisition of stakes in Taiwanese banks by their foreign counterparts is making itself felt, and Taiwanese banks are feeling threatened. Recently some of them have suffered an erosion of customers, not only at home but also abroad. They have found that their clients, mainly Taiwanese enterprises with operations in China, are turning to foreign banks for corporate loans.
Even the branches of Taiwan banks in Hong Kong, Vietnam, and Thailand have seen their business shrinking. The First Commercial Bank laments that it is losing business from a big enterprise in the Hsinchu Science Park; the wandering company is reportedly turning to the Standard Chartered Bank, which has expanded rapidly after its merger with Hsinchu International Bank in early July. (Hsinchu International was a medium-sized local bank with more than 80 branches around the island.)
Another big First Commercial client, a listed motherboard manufacturer, has expressed an intention to turn to HSBC for loans to finance its China operations.
This is all part of a drain of corporate clients that domestic banks, and their overseas branches, have witnessed. The Mega International Commercial Bank, a dynamic private domestic bank, has established a branch in Hong Kong to serve Taiwanese enterprises operating in China; but a listed Taiwanese enterprise—once a loyal client of the Hong Kong branch--is turning to Standard Chartered for loans to set up a plant in Kunshan, Jiangsu Province.
Some foreign banks here have merged with local banks as an easy way to gain more local clients. This is what Standard Chartered has done; in addition, Citibank has purchased the Bank of Overseas Chinese and ABN AMRO Bank has bought the Taitung Business Bank.
Combining their own clients and branches with those of the acquired local banks, these foreign institutions have rapidly enlarged their shares of the Taiwan market. Moreover, their well-established global financial service networks are attractive to overseas Taiwanese enterprises, especially those in China, Hong Kong, and Southeast Asia.
Insiders note that a small- and medium-sized company will normally do business with around six to eight banks on average, and a listed firm will usually deal with at least 10 banks. Since a company has so many choices among banks that sometimes offer overlapping financial services, it can hardly remain loyal to only one bank.
International Enterprises, Provincial Banks
Since more and more Taiwanese enterprises have become internationalized, they prefer to do business with international banks instead of local ones. Taiwanese banks are relatively weak in international banking, and are hampered by being prohibited from providing financial services based on China's Renminbi currency. Foreign banks are more flexible in offering financial services to Taiwanese enterprises in China because they have already established footholds there, offering RMB-based services not only in such major Chinese cities as Beijing and Shanghai but also outside that country. This is a big attraction for Taiwanese enterprises that operate on both sides of the Taiwan Straits.
Overseas Taiwanese enterprises traditionally went for loans to Taiwanese banks, either in Taiwan or Hong Kong, but more and more of those operating in China now go directly to foreign banks there.
Domestic banks worry that they will become weaker and weaker, as they are not allowed to offer cross-straits financial services and the market in China will very likely be taken over by their foreign counterparts. Taiwanese banks seem to be gradually losing their business at home too, as more foreign banks acquire local counterparts.
In addition to taking market share from domestic banks, foreign banks in Taiwan are also poaching financial personnel. It is reported that Citibank and Standard Chartered have recently lured about 400-500 financial personnel from local banks to work for their branches in China.
Insiders find it interesting that the Taiwanese personnel recruited by foreign banks are now required to be fluent in Taiwanese, instead of the English demanded in the past, since they will be dispatched to China to serve Taiwanese enterprises there.
Among the foreign banks active in Taiwan, Citibank has established footholds in Guangzhou and Shenzhen of Guangdong Province, Hangzhou of Zhejiang Province, and two metropolitan cities, Shanghai and Tianjin. The bank has even set up 'Taiwan desks' in its Chinese branches especially to serve Taiwanese clients there. HSBC has established branches in Shanghai, Shenzhen, and Suzhou to provide services to Taiwanese enterprises; it has also built up footholds in Vietnam, and they are believed to be eyeing Taiwanese enterprises operating in that country as well. ( August 2007)
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