Taiwan's Cathay in talks with China banks on investment
Taiwan's banks, long struggling with a crowded home market, have been increasing their push for better access to the huge China market, and are currently lobbying the island's regulator to increase a 5 percent limit on mainland banks investing in Taiwan peers. The hope is that with a bigger limit, Taiwan's banks will get greater reciprocal access to China's market, where they have much less of a presence than other Taiwan industries such as manufacturers, even as business ties boom. "Our strategy has been to tie up with those that can help us expand our businesses," said Lee Wei-cheng, a Cathay vice president. He declined to be specific about which Chinese banks Cathay was in talks with, or what stage the talks were at. "Particularly those with national channels, which are what we need for life insurance, banking and property insurance businesses," said Lee. Cathay and most local rivals have been urging Taiwan's regulators to lift the 5 percent limit, preferably to 20 percent, as it is not enough to attract Chinese investors. Taiwan banks' return on assets in 2011 was 0.53 percent, the lowest among banks in Asia excluding Japan, according to Fitch Ratings. They have little overseas presence to offset their dependence on the crowded home market, and are increasingly looking to China for growth. However, while Taiwan expects banking ties with China to improve this year, the negotiation process will be more difficult as mainland authorities demand more from Taiwan in return, the vice chairwoman of the financial regulator told Reuters in an interview early this month. There remains political opposition in Taiwan to a big presence of the mainland, which still claims Taiwan as its own, in the crucial financial sector. "Cathay is putting pressure on the government. They want more opening in regulation so that they can do more business in China," said an analyst at a US-based brokerage house, asking for anonymity. At around noon, Cathay stocks were up by the 7 percent limit for a session to stand at its highest intraday level since Feb. 16. The banking sector rose 3.7 percent, outpacing the broader market's 1.37 percent rise. Copyright Reuters, 2012