First Financial Leads Taiwan Shares Higher for 2nd Day

First Financial Holding Co. shares surged in Taipei trading for a fourth day, leading gains among the island’s financial services companies after Credit Suisse Group AG predicted higher earnings for the industry.

First Financial surged 5.3 percent to NT$22.95 as of 11:20 a.m. local time, set for the highest close since August 2008. It has gained 14 percent this week. Chang Hwa Commercial Bank climbed 4.2 percent to NT$22.55. Hua Nan Financial Holdings Co. climbed 5.2 percent to NT$22.10, on course for the highest since August 2008.

Consumer banks may boost earnings next year, Credit Suisse analysts including Chung Hsu wrote in a report today, adding that sentiment may improve “in coming weeks” with China branch openings and cross-strait talks. Goldman Sachs Group Inc. today upgraded Taiwan to “overweight” as a “top” market for 2011, citing relatively low inflation, “firm” domestic growth as consumer confidence recovers and attractive valuations.

“Valuation is undemanding,” with a price to book ratio of 1.1 times for 2011, Credit Suisse said. Consumer bank profits may rise 22 percent in 2011, mainly due to improving net interest margins and “benign” costs, it said.

A gauge of 36 financial and insurance companies in the Taiex Index gained 5.9 percent for the past two days, the biggest advance since June 25, 2009, and the best performer among 28 industry groups. The benchmark Taiex index advanced 0.9 percent.

The sixth round of talks about economic cooperation between the Taiwan and China are scheduled in December, the Taipei-based Straits Exchange Foundation said in a statement on Nov. 30. Chang Hwa and Hua Nan are among Taiwanese banks that have received clearance from China’s regulator to open branches on the mainland.

Banking shares rose yesterday after the Commercial Times reported that local banks made record pretax profits in the first 10 months of 2010.

To contact the reporter on this story: Weiyi Lim in Taipei at Wlim26@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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