Taiwan Financial Shares Fall on Lehman Concerns; Builders Drop

By Tim Culpan

Sept. 15 (Bloomberg) -- Taiwan shares fell to their lowest in almost three years, led by financial stocks, as Lehman Brothers Holdings Inc. prepares to declare bankruptcy. Construction companies retreated on concern a global economic slowdown will hurt Taiwan real-estate sales

Cathay Financial Holdings Co., Taiwan's largest financial- services company, dropped 6.9 percent and Farglory Land Development Co., the largest developer, fell by 7 percent. Both shares declined to their daily limits.

``Everyone is worried about Lehman Brothers, the sentiment is very bad for financial stocks,'' said Steven Chao, who helps manage about $30 million at National Investment Trust Co. in Taipei. ``Construction stocks in Taiwan are falling because the confidence is gone. We'll have a major correction in housing.''

Taiwan's Taiex Index fell 258.23 points, or 4.1 percent, to 6,052.45 at the close of trade in Taipei, the lowest since November 2005. The benchmark has lost 29 percent this year, compared with a 26 percent decline in the MSCI Asia-Pacific Index.

Cathay lost NT$4.10, or 6.9 percent, to NT$55.10, leading a 6 percent decline in the 35-member Taiex Financial and Insurance Index. Chinatrust Financial Holding Co., the fourth-largest financial company, fell NT$1.25, or its 6.8 percent limit, to NT$17.05.

Lehman Brothers, once the fourth-largest U.S. investment bank, said it will file for bankruptcy after potential buyers abandoned talks and the U.S. government declined to bail out the company. American International Group Inc., the largest U.S. insurer by assets, asked the U.S. Federal Reserve for a bridge loan to help forestall credit downgrades, the New York Times reported, citing an unnamed person.

`Banking Crisis'

``We're in the middle of a severe financial and banking crisis and it's going to get worse,'' Nouriel Roubini, Chairman of Roubini Global Economics and Professor of Economics at New York University's Stern School of Business said in a Bloomberg Television interview today.

Farglory Land lost NT$3.2 percent, or 7 percent, to NT$42.80, pushing its decline to 46 percent this year and leading the 35-member Taiex Construction Index 6.8 percent lower. Cathay Real Estate Development Co., the second-largest developer, dropped 80 cents, its 7 percent limit, to NT$10.70.

``We believe the near-term outlook of Taiwan's property market will be dictated by the global macroeconomic environment and the TAIEX's performance,'' Yuanta Financial Holding Co. analyst Jiwei Tang wrote in a report Sept. 12. Yuanta downgraded the construction sector and lowered its 2009 earnings forecasts by an average 38 percent.

``I don't like real-estate stocks right now,'' National Investment's Chao said. He holds no construction stocks and plans to buy financial shares once they've fallen a little further, he said.

The following shares rose or fell in Taiwan's stock market. Stock symbols follow company names.

Compal Electronics Inc. (2324 TT) dropped NT$1, or 4.3 percent, to NT$22.20 after Credit Suisse Group AG, downgraded the company, the world's second-largest maker of notebook computers, to ``underperform'' from ``neutral.''

HTC Corp. (2498 TT) added NT$8, or 1.5 percent, to NT$531 after Taiwan's largest cellphone vendor said sales this year will be at the ``upper end'' of its earlier forecast for 20 percent to 30 percent growth.

Industrial Bank of Taiwan (2897 TT) added 23 cents, or 3.4 percent, to NT$7.03 after the Taiwan bank said it plans to invest $17.5 million to take a 23.68 percent stake in a Vietnam venture with an unnamed U.S. bank.

Tung Ho Steel Enterprise Corp. (2006 TT) added 50 cents, or 1.4 percent, to NT$35.20, after climbing the daily limit in the previous session. Taiwan's third-largest steelmaker said it will buy back up to 20 million of its shares at NT$30 to NT$45 each for a total of up to NT$10.8 billion ($337 million).

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.