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Taishin Sticking to Vietnam Expansion After China Protests

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Taiwanese Factory In Vietnam
Smoke billows from a Taiwanese furniture factory in Binh Duong, Vietnam on May 14, 2014. Vietnam’s viability as an investment destination has been questioned after rioters damaged 224 plants and set fire to 18 during demonstrations against perceived incursions by China in the South China Sea. Source: AFP/Getty Images

May 21 (Bloomberg) -- Taiwan’s Taishin Financial Holding Co. said it’s sticking to its plans to boost investment in Vietnam even after anti-China demonstrations caused damage to plants run by Taiwanese companies.

Taishin’s bank unit plans to follow clients that set up operations in Vietnam and other countries in Southeast Asia, where labor and land costs remain attractive to Taiwanese industries from garment to shoe manufacturing, President Joseph Jao said in an interview yesterday. Taishin International Bank Co. is seeking to establish a branch in Ho Chi Minh City, where it already has a representative office, according to Jao.

“The unrest is likely to ease eventually as foreign investments are crucial to Vietnam’s economy,” Jao said from the company’s headquarters in Taipei. “We need to boost our overseas presence and diversify our risk.”

Vietnam’s viability as an investment destination has been questioned after rioters damaged 224 Taiwanese plants and set fire to 18 during demonstrations against perceived incursions by China in the South China Sea. Taiwanese companies invested about $28 billion in Vietnam in the past two decades, according to government figures.

Taishin Financial, which last year failed to merge its banking unit with Chang Hwa Commercial Bank, is open to merger and acquisition opportunities in Vietnam and other parts of Southeast Asia, Jao said.

Chang Hwa

The company is scheduled to open a branch in Singapore on June 24, with another outlet in Brisbane expected later this year or early in 2015, he said. The firm is also studying the opening of a representative office in Myanmar.

Taiwan’s finance ministry blocked in February 2013 the proposed sale of Taishin Financial’s banking unit to Chang Hwa, saying that the transaction would give Taishin Financial control of the other bank. Taishin Financial bought 23 percent of Chang Hwa for NT$36.5 billion ($1.2 billion) in 2005. Government-related entities own about 20 percent of Chang Hwa.

The current shareholding structure “may limit the development of Chang Hwa Bank” and Taishin is seeking a long-term solution out of concerns for capital efficiency and the interest of its shareholders, Jao said.

Deputy Finance Minister Wu Tang-chieh said by phone yesterday Chang Hwa Bank “is operating well” under the current arrangement and that any proposal to merge or buy Taishin’s stake must take into account the interest of employees and government-related shareholders. No such proposals are being considered, Wu said.

Regulatory Probe

Taishin stopped selling foreign-currency derivatives known as Target Redemption Forwards earlier this month after an investigation into banks’ sales of the products by Taiwan’s Financial Supervisory Commission, Jao said.

The halt in sales may cut average monthly revenue at Taishin’s treasury marketing unit by as much as 60 percent to NT$200 million in the second half of the year, compared with NT$500 million in the first quarter, he said.

Taiwan banks sold NT$161 billion worth of foreign-exchange derivatives, the Taipei-based Apple Daily reported yesterday, citing FSC data. The regulator received client complaints on yuan-linked derivative products, according to a report prepared for lawmakers last week and obtained by Bloomberg.

Taishin Financial shares lost 0.4 percent to NT$14.30 in Taipei trading today. The stock lost 1.6 percent this year, compared with the Taiex Index’s 2.9 percent increase.

To contact the reporter on this story: Adela Lin in Taipei at alin95@bloomberg.net

To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net Debra Mao, Darren Boey

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