06.05.2001
BFC reap rewards of low interest rate environment

• Bills Finance Companies (BFC) are reaping the benefits of issuing Commercial Papers (CP) to enterprises instead of bank loans. CPs are gaining favor as they are more sensitive to low interest rates. Total CPs issued in May by Taiwan's 16 bills finance companies increased to NT$583b in April.

• The bond portfolios of finance companies are also benefiting from lower interest rates. Chung Hsing (2814 'Xian Piao'), International (2813 'Guo Piao') and China (2820 'Hua Piao') hold bond portfolios ofNT$70b, NT$45b and NT$30b, respectively. While many banks recorded lower pretax earnings in the first 5 months this year compared to the same period in 2000, these three banks showed an increase. EPS for the three banks came in around NT$0.64, NT$0.55 and NT$0.47, respectively.

• VB Primasia Investment Opinion: We expect low interest rate environment will benefits bills finance companies and boost stock price performance. However, upside potential is limited by their smaller business scope. We expect more banks to transform into holding companies in an effort to expand business.

WilliamFong@Primasia.com +886-[0]2-2547-8867