Domestic banks saw first-quarter net profits from their Hong Kong branches shrink 25 percent on an annual basis to NT$4.8 billion (US$159.83 million), the first drop in the past four years, due to higher loan-loss provisions and lower interest income, Financial Supervisory Commission data showed.
Local banks’ branches in the financial hub saw interest income fall after the Hong Kong Monetary Authority in March lowered its base interest rate to 0.86 percent, compared with 2.75 percent a year earlier, the data showed.
Those branches set more loan-loss provisions out of concerns that some loans might turn sour due to the COVID-19 pandemic disrupting production and weakening market demand, Banking Bureau Chief Secretary Phil Tong (童政彰) said.
The branches saw wider valuation losses on their financial investments as the Hang Seng Index slid to a three-year low, a decline similar to those of major equity markets in Taiwan and the US, Tong said.
The Hang Seng yesterday extended the downtrend by closing down 0.74 percent to 22,961.47 points, as the passage of Hong Kong national security legislation spurred speculation about capital flight and prompted concerns that the law would jeopardize the territory’s status as an international financial center.
Hong Kong has been an important overseas market for local banks due to the territory’s advantages, including the lack of a limit on fund flows, clear regulations, a friendly tax system and low tax rates, Tong said.
Nineteen of the nation’s 35 banks have set up branches in Hong Kong, with the banks’ net profits in the territory accounting for half of their overseas net profits, Tong said.
“Local banks should keep close watch on the changes in Hong Kong’s political and economic situation, regulations and market sentiment. They should consider these factors when resetting their risk appetite,” Tong said.
There has not been a significant capital outflow from the territory, but in the first three months of this year, the banks’ combined deposits have dropped NT$29.5 billion to NT$1.13 trillion, Tong said.
By comparison, the banks’ lending rose NT$30.2 billion quarterly to NT$638 billion, Tong said, adding that the gain might be attributable to new loans granted to firms affected by the pandemic.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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