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Taiwan's Financial Stocks Gain, Led by Fubon, Cathay Financial

January 18, 2008

Taiwan's stocks rose, reversing a decline. Fubon Financial Holding Co. (2881) paced gains after Bear Stearns Cos. raised its recommendation on the stock and Goldman Sachs Group Inc. lifted its price target on the insurer.

Cathay Financial Holding Co. (2885) advanced after an analyst at UBS AG raised the share-price forecast for the stock.

Taiwan's financial stocks will rise another 15 to 20 percent in the next three months as investors buy shares on optimism the opposition Kuomintang party's landslide victory in parliamentary elections will lead to an easing of curbs on investment in China, UBS said.

``We think the rally is only halfway through,'' Pandora Lee, an analyst at UBS wrote in the report dated today. ``Too early to sell and not too late to buy.''

Taiwan's Taiex index gained 83.02, or 1 percent, to close at 8,184.65 in Taipei. The measure, which rose 1.9 percent this week, fell as much as 2.7 percent earlier today. Taiwan stock futures due in February added 1.7 percent. More than two stocks advanced for every one that declined.

U.S. shares posted their worst three-day decline since 2002 yesterday after the Federal Reserve said manufacturing in the Philadelphia region slid to a six-year low. The Standard & Poor's 500 Index lost 2.9 percent yesterday, raising speculation the world's biggest economy is in recession.

``Investors quickly overcame the initial shock wave and refocused on reasons closer to home,'' said Vickie Hsieh, who helps oversee $1.4 billion at President Investment Trust Corp. in Taipei. ``The financial sector is considered the main beneficiary of closer China ties.''

Fubon, Cathay Financial

Fubon Financial rose NT$1, or 2.9 percent, to NT$35.50, its highest since March 2004. Bear Stearns analysts Francis Chan, Steven Chan and Jim Antos rated the stock ``outperform'' with a 12-month target price of NT$41.20.

The company should sustain 10 percent income growth from loans and 15 percent from net fee income this year and next, Bear Stearns wrote in a report dated yesterday when it initiated coverage on the company. Goldman's Vincent Chan today raised his target price on the stock to NT$35 from NT$32.40.

Cathay Financial (2882), the island's biggest life insurer, added NT$1.70, or 2.1 percent, to NT$83.50. Pandora Lee, an analyst at UBS, raised the brokerage's share-price forecast for the stock to NT$96.30 from NT$88, citing lower-than-estimated writedowns in investments related to the U.S. housing market.

Yuanta Financial Holding Co., the island's largest stock brokerage, climbed 95 cents, or 3.7 percent, to NT$26.60. The company's share-price forecast was raised to NT$29 from NT$22.10 while the recommendation was lifted to ``buy'' from ``neutral'' by Goldman's Chang, according to a report dated today.

Yuanta's leadership position will allow it to benefit most from improved equity trading in Taiwan amid improved domestic political conditions, Chang wrote.

KMT Victory

The KMT won 81 seats in the 113-member parliament on Jan. 12, three times as many as Taiwan President Chen Shui-bian's party, which favors independence from China. The victory increases the chances of KMT candidate Ma Ying-jeou becoming the next president. Ma favors building ties with the mainland, including opening direct air links with China.

China Airlines (2610), the island's largest carrier, rose NT$1.15, or 7 percent, to NT$17.65. EVA Airways Corp. (2618), the second largest, added NT$1.05, or 6.8 percent, to NT$16.50.

To contact the reporter on this story: George Hsu in Taipei at

To contact the editor responsible for this story: Nicolas Johnson at

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