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Chunghwa sell-off fizzles again
TAIPEI, Taiwan (Reuters) -- Taiwan has again failed to auction off a small stake in its largest phone company Chunghwa Telecom Co, even though the government lowered the floor price on Wednesday. The three-day auction managed to offload only 7.42 million shares, or a 0.08 percent stake, the Taiwan Stock Exchange said. That was far short of the government's target of 100 million shares, or about one percent. The bulk of the shares, 6.39 million, were sold on Wednesday at an average price of T$51.1 per share, after the floor price was cut from T$52.0 to $T51.0. That offered investors a slight discount to Chunghwa's Wednesday closing share price of T$52.0. While Chunghwa gives investors a steady return, the auction's flop can be traced to Taiwan's legislature, analysts said, which sets out how much privatizations are to bring for state coffers. "The government has little choice but to set a high price, because that is what the law mandates," said Nathan Lin, a telecoms analyst with National Securities based in Taipei. The auction was meant to help plug a T$237.4 billion ($6.9 billion) fiscal budget shortfall for this year. Unlikely timingIt followed a string of botched attempts over the past few years to privatize Chunghwa, making the goal of putting the company in private hands by the end of the year unlikely. The government's stake in Chunghwa fell to 81.33 percent from 81.41 percent before the auction, the Ministry of Transportation and Communications said in a statement. "This (failure) will make the overseas share sale planned for the first half that much more difficult," said Lin. Analysts said the three-day auction attracted mostly retail investors. Institutional investors would have been more keen if the price was lowered to around T$50, at which price a local consortium snapped up a 13.5 percent stake late last year, they said. Cathay Financial, the island's largest listed financial group, bought half the 13.5 percent stake at T$50.3 per share and said the purchase was a pure financial investment that would add T$2.4 billion annually to its net profit. Cathay's group also included Fubon Insurance, the island's largest property insurer, who along with other insurers was attracted by Chunghwa's steady income stream. Taiwan insurers have been suffering from record-low interest rates and depressed stock markets. Chunghwa paid a T$3.5 cash dividend based on 2001 earnings and is expected to dish out another T$4 cash dividend for 2002, which translates into a return of about seven to nine percent. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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