Most Taiwanese financial shares advanced Thursday, extending gains after the island's regulator earlier this week released guidelines for investments to and from mainland China that are less restrictive for Taiwan's own firms than for their larger Chinese counterparts
But analysts say the positive sentiment may not last, as the guidelines aren't likely to result in any meaningful surge in investments between Chinese and Taiwanese firms in the near-term.
In guidelines for cross-straits financial investments released Tuesday, Taiwan's Financial Supervisory Commission said that Taiwanese banks would be allowed to invest up to 15% of their book value in Chinese lenders. But mainland banks won't be allowed to take more than a 5% stake in a Taiwanese counterpart.
While most Taiwanese institutions with strong capital-adequacy buffers will be allowed to buy stakes in Chinese rivals, only those mainland banks that have operated for two years in Taiwan through a representative office may open a branch on the island.
"We think a 5% stake in Taiwan banks is irrelevant, and thus, not attractive for the leading Chinese banks. If there is an acquisition, it will most likely be driven by political reasons rather than business reasons," UBS Research analyst Pandora Lee wrote in report.
"We think the positive sentiment will be short-lived. Fundamental changes, if any, still take a long time to bear fruit in Taiwan," Lee said.
And although the new guidelines mark an incremental step in the improving relationship between Beijing and Taipei, the market is unlikely to stage a sustainable rally until the much-awaited Economic Cooperation Framework Agreement is signed some time later this year between the two sides.
Worse than for foreign banks
In a note to clients released Thursday, analysts at Yuanta said Taiwan's FSC "set strict, less favorable conditions for Chinese banks compared with other foreign banks coming to Taiwan."
Citing a local media report, the brokerage said the purpose of the restrictive rules was to use "deregulation as a bargaining chip to negotiate more favorable conditions for China-bound Taiwanese banks, brokers and insurers."
"Chinatrust Financial Holding Co. and Fubon Financial Holding Co. are the most likely to benefit from exploring the China market, as they have experience exploring overseas markets, advanced products/information technology platforms, good corporate relationships and current exposure [to China]," they said.
