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May 27, 2017

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Bank picks 6 financial stocks to benefit from MOU

American multinational bank Citibank yesterday picked six financial stocks that it said may benefit from the cross-strait currency settlement memorandum of understanding (MOU) signed between China and Taiwan last week.

The six stocks chosen were Mega Financial, First Financial, Chinatrust Financial, E.Sun Financial, Taishin Financial and Yuanta Financial.

Financial shares rose yesterday on the Taiwan Stock Exchange, though some investors said the MOU was relatively conservative.

Signed last Friday, the MOU stated that China and Taiwan should each select a bank for currency settlements and clearance operations. In Taiwan, the settlement bank is expected to be either Bank of Taiwan or Mega Bank.

Mega Bank may benefit directly from the MOU if selected, said Citibank. First Financial, meanwhile, which has a strong small and medium enterprise customer base, is also set to see gains from currency settlement. Chinatrust, with expertise in fund management, will also benefit once it begins offering funds in the yuan, the Chinese currency.

Citibank yesterday gave a buy rating for the six stocks and set target prices of Mega, First, Chinatrust, E.Sun, Taishin and Yuanta at NT$25, NT$22.5, NT$25, NT$19, NT$14.75 and NT$19, respectively.

Citibank also said the MOU will pave the way for direct currency exchange between businesses on both sides of the strait, adding ease and flexibility to their use of cash and capital at hand. Meanwhile, the document will also set the stage for the offering of "financial services unique to Taiwan and China," Citibank said.

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