Taiwan exposure to European debt manageable
Local financial firms’ exposure to Greek, Portuguese and Spanish assets total NT$33.78 billion (US$1.05 billion), according to statistics from the Financial Supervisory Commission.
A breakdown of the preliminary figures showed domestic insurance firms own NT$19.52 billion of those European assets, including NT$120 million in Greek portfolios, NT$150 million in Portugal and NT$19.25 billion in Spain.
Local banks have NT$10.6 billion worth of investments and loans in the three nations, of which NT$3.2 billion are in Greece, NT$800 million in Portugal and NT$6.6 billion in Spain.
Investment trust fund companies invested NT$3.66 billion, including NT$60 million in Greece, NT$350 million in Portugal and NT$3.25 billion in Spain.
Hu Chung-ying, deputy minister of the Council for Economic Planning and Development, said the credit crisis in southern Europe is unlikely to develop into a systemic risk. Any rescues from the European Union and International Monetary Fund will be crucial to future developments. He believes that the incident’s impact on the local segment so far is manageable.
Taiwan’s macro economy, fundamentals and corporate profits stand in a healthy position. The steep decline in the island’s stock market recently came after a surge that was ranked as the fourth largest worldwide last year.
Hu said the credit concerns in the three nations added a bitter dose to the local bourse, already undermined by the negative psychological effect of foreign investors’ selling as well as caution ahead of the long Lunar New Year holidays in the middle of this month.
The current European credit problem is hardly novel. Many governments were encouraged to issue bonds to weather the global financial tsunami previously. The negative impact of such practices is surfacing now that the financial crisis is moving away, Hu pointed out.
The EU is unlikely to stay quiet in the face of the recent credit scenario. The IMF has abundant experience in handling similar situations, such as that in Iceland earlier. The damage will be controlled as long as these bodies act to help, the vice minister added.
While global financial markets were unnerved by debt worries lately, the FSC said there have been no reports of closures of financial institutions or enterprises in the three European countries.
The FSC will closely monitor domestic exposure to the three states and continue watching how the incident unfolds, unnamed officials from the commission said. (HML-THN)
(This article originally appeared in “The Liberty Times” Feb. 7, 2010.)
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