The central bank said yesterday it did not own any common or preferred shares of Freddie Mac or Fannie Mae, whose credit ratings were downgraded to near junk status, leading pundits to voice worries that the twist could deal another blow to the stock market.
The top monetary regulator remained mum on whether it was in possession of bonds linked to the US mortgage finance giants except to repeat that there was no credit issue for their bonds because they are backed by the US government, unlike their shares.
US government-sponsored enterprises Freddie and Fannie touch nearly half of mortgages in the US by either owning or guaranteeing them. The debt securities they issue to finance their operations are widely owned by foreign governments, pension funds, mutual funds, big companies and other large institutional investors.
“The central bank does not own any Fannie Mae or Freddie Mac shares,” it said in an e-mailed statement. “The two companies’ bonds still enjoy top credit ratings despite their [ongoing] financial woes.”
The central bank also said that its governor, Perng Fai-nan (彭淮南), did not speak to any media on Saturday.
The Chinese-language Economic Daily yesterday quoted an unnamed financial official as saying the credit downgrade would raise risks for domestic financial institutions with portfolios related to Fannie and Freddie.
The financial industry, yet to recover from the subprime mortgage crisis, may suffer more losses tied to Fannie and Freddie, which issued US$5.2 trillion worth of bonds, the daily warned. It also said that authorities would ask local lenders to update their exposure figures.
The central bank said the investments at issue were primarily long-term mortgage-backed securities whose credit ratings remain top graded.
“The US government has announced measures, including acquisition, to help sustain the two institutions, aware of the central role they play in the nation’s housing sector,” the central bank said.
Together, Fannie and Freddie sponsor 70 percent of US mortgage loans, said the central bank.
Last month, the bank said that it only purchased government bonds and labeled the pair’s debts as semi-official in nature.
The comment failed to prevent the local bourse from plunging for several days last month on allegations the central bank stakes NT$900 billion (US$28.84 billion) of foreign reserves in Fannie and Freddie securities.
Domestic financial service providers reported NT$700 billion (US$21.73 billion) in investment connected to the two ailing institutions, with Cathay Financial Holding Co (國泰金控) posting NT$239.14 billion in exposure, topping other rivals.
Shin Kong Financial Holding Co (新光金控) filed the second highest exposure at NT$140 billion.
The central bank said the value of the bonds in its possession far exceeded that of their costs, meaning it remained financially robust.
Hon Hai Precision Industry Co (鴻海精密) yesterday said that its research institute has launched its first advanced artificial intelligence (AI) large language model (LLM) using traditional Chinese, with technology assistance from Nvidia Corp. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), said the LLM, FoxBrain, is expected to improve its data analysis capabilities for smart manufacturing, and electric vehicle and smart city development. An LLM is a type of AI trained on vast amounts of text data and uses deep learning techniques, particularly neural networks, to process and generate language. They are essential for building and improving AI-powered servers. Nvidia provided assistance
DOMESTIC SUPPLY: The probe comes as Donald Trump has called for the repeal of the US$52.7 billion CHIPS and Science Act, which the US Congress passed in 2022 The Office of the US Trade Representative is to hold a hearing tomorrow into older Chinese-made “legacy” semiconductors that could heap more US tariffs on chips from China that power everyday goods from cars to washing machines to telecoms equipment. The probe, which began during former US president Joe Biden’s tenure in December last year, aims to protect US and other semiconductor producers from China’s massive state-driven buildup of domestic chip supply. A 50 percent US tariff on Chinese semiconductors began on Jan. 1. Legacy chips use older manufacturing processes introduced more than a decade ago and are often far simpler than
STILL HOPEFUL: Delayed payment of NT$5.35 billion from an Indian server client sent its earnings plunging last year, but the firm expects a gradual pickup ahead Asustek Computer Inc (華碩), the world’s No. 5 PC vendor, yesterday reported an 87 percent slump in net profit for last year, dragged by a massive overdue payment from an Indian cloud service provider. The Indian customer has delayed payment totaling NT$5.35 billion (US$162.7 million), Asustek chief financial officer Nick Wu (吳長榮) told an online earnings conference. Asustek shipped servers to India between April and June last year. The customer told Asustek that it is launching multiple fundraising projects and expected to repay the debt in the short term, Wu said. The Indian customer accounted for less than 10 percent to Asustek’s
Gasoline and diesel prices this week are to decrease NT$0.5 and NT$1 per liter respectively as international crude prices continued to fall last week, CPC Corp, Taiwan (CPC, 台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. Effective today, gasoline prices at CPC and Formosa stations are to decrease to NT$29.2, NT$30.7 and NT$32.7 per liter for 92, 95 and 98-octane unleaded gasoline respectively, while premium diesel is to cost NT$27.9 per liter at CPC stations and NT$27.7 at Formosa pumps, the companies said in separate statements. Global crude oil prices dropped last week after the eight OPEC+ members said they would
RSS