Power And Dollar

Safe Landing for Taiwan Banks and $$

Taiwan banks have just been permitted to conduct business in China via their branches in Hong Kong.  We learn one bank is immediately benefited.  Who are the other beneficiaries?

 

News sources:

http://www.iht.com/articles/2008/03/12/business/taibanks.php

http://www.forbes.com/markets/commodities/2008/03/12/taiwan-banks-mainland-markets-equity-cx_jc_0312markets03.html

 

Firstly, this is not a unilateral decision.  The announcement is made by the Executive Yuan.  However, approval from Mainland China is obvious.  The absence of an announcement from the counterpart is intriguing.  Secondly, the timing of this approval is also interesting.  Why did Mainland China want DPP to have the credit of accomplishing this difficult task?  

 

Other Taiwan banks which have business in Hong Kong will now rush to establish their shop in Mainland China.  The stock market will timely adjust the prices of these banks’ stocks quickly.  However, who else would benefit?

 

These Taiwan banks will require wholesale bankers.  These wholesale banks will be either licensed and Hong Kong based banks or Mainland China banks with restricted license.  There are 71 of the largest 100 banks in the world operating in Hong Kong.  Given the banks are of Taiwan origin, only Hong Kong based banks will be vendors for this service.  Therefore, this list is very very short.  Once you check which bank is listed in the NYSE/Nasdaq or LSE, your selection will be a very simple task.  The final question left before your mouse click is price.  Can you buy this stock at the right price?  My answer is no matter which currency you will use to buy, the price right now is low.  So, it is definitely a buy.  Of course, how important is this wholesale business to the whole bank’s portfolio?

 

For banks of Hong Kong origin which recently started their operation in Taiwan may suffer a little.  Their advantage was their access to elsewhere in the world, particularly their reach Mainland China.  Now that other local Taiwan banks can offer that, that would make this advantage varnish fairly quickly.  So, this is a negative for these banks.

 

Now that money can flow from Taiwan to China, there may also be some painful adjustment in capital intensive or long term investment cycle industries.  For companies that are already in operation in Mainland, their financing will be easier.  However, these companies tend to be non-publicly traded companies (SMEs).  The publicly traded companies already secured their banking relationships long time ago.  

 

With their better quality control process than their Mainland based counterparts, Taiwan based SME manufacturers with facilities in Mainland China (which one isn’t?) are expected to be more competitive in the market.  

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March 13, 2008 - Posted by | China, china politics, chinese, Current Affairs, economics, election, opinion, politics, Taiwan

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