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Taiwan seeks to redraw its financial landscape

Taiwan is desperately overbanked and the unprofitable financial sector is crying out for successful consolidation and rationalization, rather than ill-judged government initiatives. But that has not stopped foreign investors buying into the market for the first time. Nick Parsons reports

Subordinated debt issuers get mixed reception | Newbridge deals sparks hopes for foreign interest

AT THE TAIL end of January, as the Year of the Dog drew near, international investors made their first forays into Taiwan's banking sector.

First, GE Consumer Finance announced the acquisition of a 10% stake of $85 million in Cosmos Bank, a mid-tier player that pioneered the cash card in Taiwan. A few days later that move was dwarfed by the news that Taishin Financial Holding Co (FHC) had attracted a NT$27 billion (US$855 million) investment from Asian private equity firm Newbridge Capital. Then, as Newbridge signed the deal on the first Monday after the New Year holidays, Nomura Holdings announced that – with an anchor investor in place – it was taking a NT$4 billion stake in the same bank group [see Newbridge deals sparks hopes for foreign interest, this issue].

These are important advances towards the Taiwan government’s goal of consolidating the country’s fragmented banking sector and attracting foreign investment. Or at least they are long-delayed signs that something is moving in Taiwan’s uninspired financial sector.

In October 2004, president Chen Shui-Bian laid out his master plan to redraw Taiwan’s financial landscape and beef up its competitiveness in the region.

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