Taiwan’s capital market net profit hit a record high NT$646.3 billion (US$22.9 billion) from January through November, driven by the securities and insurance industries which gained from the domestic stock market rally.
That was up 4.07% from NT$621 billion in the same period of 2019, and 1.92% higher than the NT$634.1 billion net profit for all of 2019, the Financial Supervisory Commission (FSC) says in a statement on December 30.
The securities industry was the best performing sector, with net profit of NT$71.2 billion, up 38.83% from the first 11 months of 2019.
The insurance industry posted a net profit of NT$224 billion in January through November, a 21.8% increase from the same period of 2019. Life insurers led the gain with profits up 23.1% to a record high NT$208.1 billion. Profits of property insurance firms grew a more modest 3.9% to NT$15.9 billion.
The banking sector bucked the trend, with profit declining 8.9% to NT$351 billion.
Banks were dragged down because borrowers reeling from the coronavirus crisis stopped servicing their loans, according to an investment consultant in Taiwan.
Figures from Hong Kong data provider CEIC show that the non-performing loan ratio of Taiwan’s banks climbed from 0.22% in January 2020 to 0.24% in September.
The consultant says profits in the securities and insurance sectors were driven by Taiwan’s stock market rally.
The benchmark stock index had soared almost 22% through 2020 as of early December 31 as Taiwanese businesses with operations in China look to relocate investments to Taiwan and other Asian countries amid the island’s political tensions with Beijing. Taiwan’s effective management of the coronavirus pandemic also helped to fuel the stock market gain.
“Taiwanese insurers have been reallocating part of their portfolios from cash holdings to equities and bonds in recent years in search for yields,” the Taipei-based consultant tells Asia Asset Management, speaking on condition of anonymity. “The approach allows them to better benefit from the stock market uptick [in 2020].”
Life insurers invested 18.21% of their total assets in equities in 2019, up from 12.76% in 2015, according to figures from the Taiwan Institute of Economic Research. The share of assets in bank deposits dropped from 22% to 20.18% over the same period.