On track to reach a positive interest spread
​Reiterate BUY and lift TP to NT$54: Cathay’s share price is highly correlated to the interest rate trend, which we attribute to its lowest overseas fixed income duration of ~9 years. This implies it has more space to shift its investment portfolio to higher bond assets yields when the bond yield curve steepens upwards. We also expect Cathay Life to return to a positive interest rate spread quicker vs mgmt’s expectation, within 5 years. We raise 2016/17F earnings by 8%/2% and lift our TP to NT$54, based on a 0.8x 2017F P/EV (0.7x previously) to reflect
Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.
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