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Macro Economic Analysis Taiwan 530 V03
Macro Economic Analysis Taiwan 530 V03
Taiwan at a glance
Banking sector
Stock market
Bond market
Development issues
Territory
31,688 km²
Population
22.95 million
Capital
Taipei
Government System
Democracy
Administrative Divisions
2 municipalities / 16 counties / 5 provincial cities
Currency
TWD, semi-flexible exchange rate, 1 EUR = 47.865TWD (2008.05.23)
Languages
Mandarin, Taiwanese
Ethnicities
Han (92%) and Taiwanese aborigines (2%)
Religion
Buddhism, Islam, Taoism, Christianity
3
Source : China Statistical Yearbook, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
TAIWAN AT A GLANCE
- ECONOMIC DEVELOPMENT
Taiwan GDP 2000 - 2008 Taiwan is the 21th largest economy in
USD Million % the world (2006¹)
GDP (million US) GDP Growth Rate
450,000 7.00
413,164 Considering the GDP per capita,
6.15 6.00
400,000 5.77
365,503
383,303
5.70 Taiwan is the 36th in the world in 2006
355,958
350,000
321,230 4.64 331,007 4.89 5.00
( at $USD 16,274 )
305,624 4.16 4.32
291,694 297,668 4.00
300,000 3.50 Taiwan’s 2007 GDP amounted to
3.00
250,000 $USD 383,303 million, along with a
2.00
200,000 consistent growth since 2002.
1.00
150,000
0.00
Taiwan’s growth has consistently
100,000
-1.00
(except 2001) been higher than CPI
50,000
inflation, indicating a positive real
-2.17 -2.00
growth
0 -3.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 E
Economic Outlook for 2008:
GDP Growth rate and CPI¹ 2000-2008 The latest world economic projection
7.00
Taiwan at a glance
Banking sector
Stock market
Bond market
Development issues
Over the second half of the 20th century, Taiwan has transformed itself from a predominantly agrarian economy
into a vigorous industrialized economy, a process that may be summarized in three main phases:
Taiwan’s economy transform has gone through three phases of development:
In 1949, the Central Bank relocated with the government from Mainland China to
Phase 1: 1949 to 1980 Taipei . A highly successful land reform program launched Commonly, bonds
Shift from Agriculture to issued by the government as compensation for the agricultural lands confiscated
Manufacturing and redistributed were utilized by the former landlords as collateral to secure loans
with which they started up manufacturing and other businesses
6
Source :Taiwan Yearbook 2007, NPV China analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW
- RECENT DEVELOPMENT
Financial reforms have been conducted from 2000:
Taiwan opened its market for new banks in the early 1990s. As a result, 16 new banks were established and left
behind an “over-banking” problem. More specifically, while market competition stimulated the development of
the financial markets, the overly competitive banking market deteriorated banks’ asset quality, narrowed their
interest spread and reduced profit margin from them
For example, the market share of the top 5 banks in Taiwan only accounts for 38%, while the figures in Korea
and Hong Kong are 87% and 76% respectively. In other words, Chinese Taipei lacked big and good banks
Over-regulation was another problem in our financial market. Previously, banks were considered as policy tools
aiming to support our manufacturing industry. This situation inevitably restricted the effectiveness of market
mechanism and limited the competitiveness of our financial markets
The goal of the first reform aimed at resolving the non-performing loan problems
For the purpose, the previous financial regulator, the Ministry of Finance (MoF), lowered business tax of
financial institutions from 5% to 2% and the Central Bank lowered deposit reserves to encourage bad debt
write-offs
The Ministry of Finance established the Financial Restructuring Fund (or RTC fund) and created Asset
Management Companies to deal with distressed financial institutions and resolve their deteriorated assets
7
Source :Financial Supervisory Commission , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW
- RECENT DEVELOPMENT
The MoF enacted the Financial Institution Merger Act and the Financial Holding Company Act to create a better
M&A legal environment and lessen the adverse effect of over-banking.
The results of the first reform are significant. The average NPL ratio of domestic banks reduced from 11.27% in
2001 to 2.39% in June 2006.
In addition, 14 financial holding companies have been established since 2001. However, since there are only
few M&A deals in recent years, the number of our banks is still large.
To promote integrated financial supervision, we have also enacted a law aiming at the integration of several
supervisory agencies. The Financial Supervisory Commission was established on July 1, 2004 to consolidate the
supervision of banking, securities and insurance sectors, and to act as a single regulator under the Executive Yuan
The key objective of phaseⅡ financial reform is consolidation and promoting Taiwan as a regional fund-raising
and asset management center
The four goals of market consolidation are: (1) three banks with market share over 10% by the end of 2005; (2)
halving the number of state-owned banks by the end of 2005; (3) reducing FHCs (4)financial institutions with
foreign investment
To speed up financial M&As, the FSC has been trying to create an environment beneficial for consolidation, not
only for domestic financial institutions but also for foreign investors
It revises outdated regulations to be in line with international norms, implements differentiated supervisory
measures to encourage well-performing financial institutions, and offers incentives for consolidation. .
8
Source :Financial Supervisory Commission , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
FINANCIAL MARKET OVERVIEW
- BREAKDOWN OF FINANCIAL SERVICE INDUSTRY
10.04 2007
9.98 2006
10.43 2005
10.52 2004
10.56 2003
Billion TWD
25000 180.00%
160.00%
20000 140.00%
120.00%
15000
100.00%
80.00%
10000
60.00%
5000 40.00%
20.00%
0 0.00%
2002 2003 2004 2005 2006 2007
10
Source :Taiwan Stock Exchange , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN TAIWAN
Taiwan at a glance
Banking sector
Stock market
Bond market
Development issues
11
Executive Yuan
Financial Supervisory
Central Bank of R.O.C Commission
(Taiwan) ( Regulator )
Supportive Departments :
Taiwan Post Co. - International Affairs
Departments
- Legal Affairs Department
Credit Departments of - General Planning Department
Farmers’ & Fishermen’s - IT Department
Associations - Secretary Office
12
Source :FSC, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR
- STRUCTURE 2/3
In December 1949, the Bank relocated with the government from Mainland China to Taipei
In November, 1979, the newly revised Central Bank of China Act was promulgated. While the Bank has
since been under the Executive Yuan (Cabinet), its independent role in making monetary policy has
not been changed.
the Bank's operational objectives include promoting financial stability, ensuring sound banking operations,
maintaining the stable internal and external value of the currency and, within the scope of the above three
objectives, fostering economic development.
13
Source :CBC, NPV analysis * CBC : Central Bank of Republic of China (Taiwan)
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR
- STRUCTURE 3/3
Financial Supervisory Commission (FSC) was inaugurated and commenced operation since 1 July 2004 .
FSC functions act as a single and independent regulator that directly reports to the Executive Yuan.
Main goal : consolidate the supervision of banking, securities and insurance industries under one roof, as well as to
integrate the tasks of examining these industries.
The FSC includes 4 bureaus and 5 supporting departments.
4 bureaus
- The Bureau of Monetary Affairs
- The Securities and Futures Bureau } responsible for the supervision of financial institutions.
- The Insurance Bureau
- The Examination Bureau is in charge of the examination of all financial institutions.
It is worth mentioning that the newly organized Examination Bureau integrates examination staff from the CBC*,
BOMA** and the CDIC***, which provides better administrative and human resources to conduct financial examination
under one agency.
5 supporting departments
- International Affairs Departments
- Legal Affairs Department
- General Planning Department
- IT Department
- Secretary Office
Billion TWD
45 000
40 000
35 000
30 000
25 000
20 000
15 000
10 000
5 000
0
2003 2004 2005 2006 2007
• As of the year-end 2007, the total assets of the banking sector amounted to TWD 38235 billion, an
increase of RMB 501 billion from 2006.
• During the same period, the total liabilities reached TWD 36069 billion, an increase of TWD 433 billion.
15
Source :CBRC 2007, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR
- FINANCIAL INSTITUTIONS ASSETS BREAKDOWN
Local branch of
foreign banks
2006 Credit Cooperatives
Bills Finance
Companies
2005
Trust and Investment
companies
Credit Departments of
Farmers' Associations
2004
Credit Departments of
Fishermen's Associations
The Postal Savings System
2003
• Domestic banks occupy the majority of total asset and account for 72.8% of total.
• Credit Cooperatives, Bills Finance Companies and Trust and Investment company are decreasing
gradually.
Billion TWD
30 000 73.0%
25 000 72.0%
71.0%
20 000
70.0%
15 000
69.0%
10 000
68.0%
5 000 67.0%
0 66.0%
2003 2004 2005 2006 2007
• As of the year-end 2007, total deposits and total loans outstanding amount to 25.245 and 18.019 billion,
respectively
17
Source :FSC, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR
- NPLs¹ OF DOMESTIC BANKS
Billion TWD
900 6.00%
800
5.00%
700
600 4.00%
500
3.00%
400
300 2.00%
200
1.00%
100
0 0.00%
2003 2004 2005 2006 2007
• The quality of assets improved dramatically due to the Financial Reform from 2000.
• By the end of 2007, the NPLs of major commercial banks totals TWD 337.4 billion, a decline of TWD 38
billion from end-2006. The NPL ratio was 1.79 percent, with a decrease of 0.8%
18
Source :FSC , NPV analysis Note 1: Non-Performing Loans
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
BANKING SECTOR
- ROA AND ROE OF DOMESTIC BANK
12
10
0
2003 2004 2005 2006 2007
-2
ROA ROE
• ROA and ROE decrease from 2005 due to Double-card debt crisis (credit card / cash card ) and over competition
19
Source :FSC , NPV analysis Note 1: Non-Performing Loans
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN
CHINA
Taiwan at a glance
Banking sector
Stock market
Bond market
Development issues
20
Financial market
Stock Stock
Warrant Bond
Bond Derivative
Beneficiary Certificates
ETF
Beneficiary Securities
21
Source :TSEC, GTSM , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
These are from china part. Is
STOCK MARKET there anything you meant to
add in?
- REGULATOR ( Exchange Market ) This is the correct one.
22
Source :TSEC NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET
- REGULATOR ( OTC Market )
The government reopened the over-the-counter trading of bonds in October 1982
The Taipei Securities Dealer's Association (TSDA) started handling over-the-counter trading of stocks in
February 1988
In 1994, this non-profit organization with the mission to develop the over-the-counter market was named
23
Source :GTSM, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET
- OVERVIEW
billion TWD
40000
35000
30000
25000
20000
15000
10000
5000
0
2003 2004 2005 2006 2007
Capital Issued Market Capitalization Trading Value
• From 2003-2007, Taiwan stock exchange market has grown consistently and stably.
• In 2007, the market capitalization reaches 21,527 billion TWD and growth rate is 11.1% from 2006.
• In 2007, the Trading Value reaches 33,527 billion TWD and growth rate is 38.6% from 2006
• In 2007, the Capital Issued reaches 5601 billion TWD and growth rate is 1.4% from 2006
24
Source :FSC Financial Outlook Monthly, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET
- COMPARISON BETWEEN EXCHANGE AND OTC MARKET
Number of Listing Market Capitalization
TWD (Billion) TWD (Billion)
800
25000
700
600
20000
500
400 15000
300
10000
200
100 5000
0
2003 2004 2005 2006 2007 0
GTSM TSEC 2003 2004 2005 2006 2007
GTSM TSEC
TWD (Billion)
Trading Value Trading Volume
TWD (Billion)
40000
120000
35000
100000
30000
25000 80000
20000 60000
15000
40000
10000
20000
5000
0 0
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
• TSEC and GTSM occupy 91.89% and 8.11 % of the Market Capitalization respectively in 2007
• TSEC and GTSM occupy 85.56% and 14.44 % of the Market Capitalization respectively in 2007
• TSEC and GTSM occupy 85.80% and 14.20 % of the Market Capitalization respectively in 2007
Put the source
25
Source :TSEC , GTSM NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET
- MARKET PERFORMANCE 2007
Volume-Weighted Index
26
Source :TSEC , GTSM NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET
- COMPARISON BETWEEN EXCHANGE AND OTC MARKET What is
emerging stock
P/E Ratio CHECK THE
Turnover Ratio COMPARISIO
45.00
40.00
N IN NEXT
35.00
500.00
SLIDE
30.00 400.00
25.00 300.00
20.00 200.00
15.00 100.00
10.00
0.00
5.00 2003 2004 2005 2006 2007
0.00
2003 2004 2005 2006 2007 STOCK ON TSEC STOCK ON GTSM EMERGING STOCK ON GTSM
2.00 30.00
25.00
1.50
20.00
1.00 15.00
0.50 10.00
5.00
0.00
2003 2004 2005 2006 2007 0.00
2003 2004 2005 2006 2007
STOCK ON TSEC STOCK ON GTSM EMERGING STOCK ON GTSM
STOCK ON TSEC STOCK ON GTSM EMERGING STOCK ON GTSM
• Emerging Stock on GTSM owns the highest P/E Ratio, but decrease dramatically from 2006 to 2007
• Stock on GTSM owns much higher turnover rate than the others
• Stock on TSEC owns the highest Average Earning Per Share and Average Market Value Per Share
27
Put the source
Source :TSEC , GTSM NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
STOCK MARKET
- COMPARISON BETWEEN STOCK AND EMERGING STOCK IN GTSM
• Listing requirement is the main difference between stock and emerging stock.
• Stock is more strict than emerging stock with respect to Capital, Years of establishment, Profitability, Advisory
Incorporated and registered under the Company Law for no less than two full fiscal years.
Years of establishment no
(Technology enterprises and state-run enterpriss are not subject to this limitation.
Pre-tax income as a percentage of paid-in Capital exceeds 4% in the latest year and no
Profitability accumulated loss in the final settlement of the latest fiscal year; or the ratio in each of the
(Operating profit and pre-tax latest 2 years exceeds 3%; or the exceeds 3% on average in the latest 2 years, and the
no
income as a percentage of profit in the latest year is better than that of the year before. The pre-tax income in the latest
paid-in Capital) fiscal year shall not be less than NT$4 million.( Technology business and state-run
business are exempted from this requirement).
Recommended in writing at least two securities firms after public issue with leading and
Advisory period no
co-sponsoring underwriters named.
1. More than 300 registered shareholders holding between 1000 shares to 50,000
shares; and
Dispersion of shareholding no
2. The total number of shares held by aforementioned shareholders is more than 10%
of the total issued and outstanding shares or more than 5,000,000 shares
28
Source : GTSM Fact book 2007 NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN
CHINA
Taiwan at a glance
Banking sector
Stock market
Bond market
Development issues
29
The turnover in the bond market in 2007 reached NT$193,644.6 billion (convertible bonds and
corporate bonds with warrant excluded)
NT$93,178.7 bi l l ion involved out right trades, accounting for 48.12% of total turnover and
representing a decrease of 45.04% as compared to 2006
Government bonds still represented a lion’s share in outright trade, accounting for as much as
98.74% of all outright trades, followed by corporate bonds with 0.41%, financial debentures with
0.15%, beneficiary securities with 0.17%, strip bonds with 0.07%, and foreign bonds with 0.46%
The turnover of RP/RS trades totaled NT$99,857.9 billion in 2007, representing a decrease of
5.49% from NT$105,663.9 billion in 2006
Since 2003, practically all outright trades of government bonds went through the GTSM electronic
bond trading system (EBTS). In 2007, the amount of outright trade that went through EBTS
reached NT$88,596.5 billion, accounting for 95.08% of outright trades in the market
30
Source :GTSM Annual Report 2007, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET
- OVERVIEW
Unit:NT$ Billion GTSM Market
250,000
200,000
150,000
100,000
50,000
-
2003 2004 2005 2006 2007
Trading Value Outstanding
• Trading Value started to decrease from 2005, with -16.03% and -24.47% growth rate in 2006 and 2007
respectively
• Outstanding has kept growing slightly from 2003 to 2007
• At the end of 2007:
• bond trading volume reaches 133,382 billion
• bond outstanding is 5,612 billion TWD
31
Source :FSC, Securities and Futures Bureau , 2007, NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
BOND MARKET
- BOND ISSUE BY PRODUCT (GTSM)
2007 Government
Bond
Financial Debenture
2006
Beneficiary Securities
2005
Corporate Bond
with Warranty
Convertible&Exchangable
Corporate Bond
2004
Foreign Bond
International Bond
2003
• Financial debenture and Beneficiary certificate are the two main sector that keep growing for these 5 year.
Especially for Beneficiary certificate
32
Source :GTSM Annual report 2007 , NPV analysis
2008 05 21 – SRI in APAC Emerging Markets MATERIALE NPV – RIPRODUZIONE VIETATA
MACROECONOMICS ANLYSIS OF THE FINANCIAL SECTOR IN
CHINA
Taiwan at a glance
Banking sector
Stock market
Bond market
Development issues
33
34