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Taiex inches up, but still falls short of 9,000 mark

Taiex inches up, but still falls short
of 9,000 mark

Taiwan's Taiex index rose yesterday, erasing earlier losses. Chi Mei Optoelectronics Corp. gained after posting higher profit. United Microelectronics Corp. climbed after the company predicted higher shipments.
Insurance stocks fell after Taiwan Life Insurance Co. announced an NT$428 million (US$13 million) loss in the first half from investing in a Bear Stearns Cos. fund containing U.S subprime mortgages.
"Investors are shunning financial companies with possible exposure to CDOs," said Murphy Huang, who helps manages US$3.5 billion in assets at PCA Securities Investment Trust Co. in Taipei. "Technology companies with good earnings attracted some of those funds."
The index rose 58.69, or 0.7 percent, to close at 8,950.57 in Taipei, after falling as much as 1.9 percent and gaining 2.2 percent. The measure slid 4.3 percent yesterday, the biggest drop since May 2004. About three stocks declined for each that gained. Futures due in August climbed 2.1 percent to 8,880.
Taiwan Life Insurance Co. dropped NT$2.80, or 4.6 percent to 58.6. Taiwan Life has written off its entire investment in the Bear Stearns High Grade Credit Strategies fund, it said in an e-mailed statement.
Cathay Financial, owner of the island's largest life insurer, fell NT$80, or 1 percent, to NT$79.40. Shin Kong, which owns Taiwan's No.3 life insurer, dropped NT$1.85, or 5 percent, to NT$35.50.
"Concern about the subprime problem has finally hit home for Taiwan investors," said Michael On, who manages US$100 million assets at Beyond Asset Management Co. in Taipei.
Cathay Financial has invested NT$1.8 billion in CDOs containing subprime home loans, Chief Strategy Officer C.K. Lee said in a phone interview yesterday. Shin Kong, which owns the No. 3 life insurer, has invested as much as NT$11.7 billion in such instruments, Chief Financial Officer Winston Yung said in an interview.
Both Lee and Yung said their companies bought the CDOs in 2004 and 2005. "In the worst case scenario, if all the borrowers default, the impact would be just NT$1.8 billion," said Lee. He added the CDOs Cathay invested in all have credit ratings of A or higher.
CDOs pool assets ranging from investment-grade asset-backed debt to high-yield loans, and repackage them into bonds. The securities are split into portions with ratings as high as AAA to unrated, known as the equity portion. Any losses on the underlying collateral are first assigned to the equity portion.
The Financial and Insurance Industry Index, which measures performance of 36 lenders and insurers, fell 0.8 percent yesterday.