Taiwan shares fell slightly yesterday on fears that banks will face losses as lawmakers prepare to cap interest rates on credit and cash cards.
The Taiwan Stock Exchange's Weighted Price Index fell 21 points, or 0.3 percent, to 6,329.52.
"Profit-taking was evident particularly in select technology stocks that scored strong gains previously," said Alex Huang, an assistant vice president at Barits International Securities.
Taiwan's legislature is expected to approve tomorrow an amendment to the Bank Act that will cap interest rates on credit card and cash card loans at 10 percentage points above the island's average one-year deposit rate.
The cap would translate into an annual interest rate of around 12 percent for consumer loans, lower than the 20 percent or so banks currently charge. The bill has passed the first reading, and will enter the two final readings tomorrow.
"Approval of the amendment would imply that all local (credit and cash) card operations would suddenly become money-losing businesses," said Jesse Wang, a BNP Paribas Securities analyst.
Opposition and ruling lawmakers are in favor of the bill and have agreed to push for the amendment, said Linda Lin, an aide to Eric Shyu, an opposition lawmaker who supports the new measure.
The financial subindex fell 1.2 percent. Chinatrust Financial Holding lost 5.1 percent to NT$26.95. The firm owns Chinatrust Commercial Bank, the Taiwanese credit-card issuer with the highest number of clients.
Taishin Financial dropped 5.7 percent to NT$18.1. The company owns Taishin International Bank, the island's largest cash-card loans provider as measured by the value of loans.
Huang attributed the weakness in financial stocks to a report on possible limits on interest spread for banks' credit and cash cards.
"Investors originally were pinning hopes on support from financial stocks to the broad market, but the interest spread (factor) apparently weighed down sentiment," he said.
For the coming days, Huang said he sees market consolidation continuing within a narrow band, with liquidity-driven interest, year-end window-dressing and expectations of measures to boost the economy and cross-strait relations offsetting post-election political concerns.
However, the tourism sector remained firm on sustained hopes for government permission for more Chinese visitors to the island.
The tourism sector was up 3.82 percent yesterday.
Decliners outnumbered gainers 619 to 438, with 168 stocks unchanged.
A total of 12 stocks closed limit-up, while 14 were limit-down.