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May 28, 2017

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FSC chairman downplays Portuguese bank troubles

TAIPEI, Taiwan -- Financial Supervisory Commission (FSC) Chairman Tseng Ming-chung (曾銘宗) yesterday downplayed concerns over reports of excessive debt exposure of a Portuguese bank by stating that the isolated incident will not affect the Taiwan market significantly, at a public engagement yesterday.

According to Tseng, recent reports that exposed Portugal's Banco Espirito Santo (BES) will not affect the momentum of the Taiwan market. Taiwan's fundamental indicators remains sound, said Tseng, adding that domestic banks' exposure to troubles in Portugal is limited to no more than US$1 billion. Tseng specified that he will retain an optimistic outlook on the local market, until the half-year earnings reports are due to be published by the private sector before Aug. 14.

Reports had exposed BES' attempt to cover up a 1.3-billion-euro hole on its books through a holding company, which had sent its shares plummeting by 17.24 percent to 0.5 euros before Portuguese regulators suspended trading.

Since the emergence of reports, ramifications were observed at major bourses throughout Europe including a 100-point slump in Frankfurt's DAX, and a 180-point intraday decline in the Dow Jones Industrial Average. The TAIEX yesterday saw similar declines in the morning session, losing as much as 82-points intraday, with the financial sector falling by 1 percent to close 9,495.84-points, down by 69.28 points.

Meanwhile, Tseng acknowledged that current trading participation among the investing public in the local market is lacking compared to the last time the TAIEX stood at the 9,500-point benchmark. Tseng stated that compared to the current NT$220 billion, the balance of margin loans stood at around NT$420 billion during the TAIEX's previous climb to the 9,500-point. The figure indicates that most members of the investing public are adopting a more conservative stance in equities holdings, and are more hesitant in using leverage.

Tseng also noted that foreign institutional investors have thus far accumulated net capital inflows totaling at US$193.6 billion, a new historical high record, and remain active in the local market.

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