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Rating
on Shinkong Chi-Shin Fund Raised to 'twAA-f'
RATIONALE Taiwan Ratings Corp. today raised its bond fund rating on Shinkong Chi-Shin Fund to 'twAA-f' from 'twA+f'. The rating action is based on the fund’s improved credit quality and its higher level of liquid assets, which accounted for more than 40% of its total assets as at September 30, 2004.. A bond fund rating, identified by the 'f' subscript, reflects the level of protection against losses from credit defaults, and is primarily based on an analysis of the credit quality of the fund's investment portfolio. The rating also takes into account the fund’s liquidity, diversification, maturity profile, and management to reflect the characteristics of domestic bond funds in Taiwan. The rating is not directly comparable with a debt rating due to differences in rating criteria, and does not comment on the market price stability of the fund’s assets. Shinkong Investment Trust Co., Ltd. (SKIT) manages the Shinkong Chi-Shin Fund and Taishin International Bank is the fund’s custodian bank. SKIT was established in April 1993 and is 50% owned by the Shinkong Group, which is one of Taiwan's leading conglomerates with businesses in the manufacturing and financial sectors. SKIT currently manages 18 mutual funds, including 12 equity funds, two balanced funds, and four bond funds. At the end of August 2004, SKIT’s total funds size amounted to NT$110 billion. In terms of total funds size under management, SKIT ranks the tenth largest securities investment trust enterprise in Taiwan, with a market share of 4.1%. As
at September 30, 2004, Shinkong Chi-Shin Fund had NT$47.3 billion in assets
under management, consisting of straight corporate bonds (31% of total
assets), time deposits (23%), repos (20%), financial debentures (16%),
and structured deposits (9%). The fund’s corporate bond position is either
guaranteed by domestic financial institutions or by issuers rated 'twA-'
or above. The fund places its time deposits in banks rated 'twA' or above.
The credit quality of the fund’s repo counterparties is satisfactory,
and only about 1% of its total assets are with repo counterparties rated
below 'twBBB-'. Overall, Taiwan Ratings views Shinkong Chi-Shin Fund's
credit quality as strong. As at September 30, 2004, the fund's weighted
average maturity was 2.26 years and liquid assets accounted for a strong
43% of its total assets.
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