RPT-Taiwan, China ink financial pact, to take effect soon

(Repeats story filed late on Monday)

* MOU to take effect within 60 days from now

* MOU covers financial supervision, information exchange

* Taiwan to amend laws to allow Chinese banks' investment

* Chinese banks seen buying Taiwan bank stakes early in
2010

* Taiwan fin shares up 55 pct yr to date on China optimism

(Adds quote, details in paras 4, 13-15)
(For a related Q+A, please click [ID:nTP43936])

By Faith Hung

TAIPEI, Nov 16 (Reuters) - Taiwan has signed a financial
service pact with China, the Taiwan government said on Monday,
allowing its banks to tap China's massive market and paving the
way for banks on both sides to invest in each other.

The much-anticipated pact, or memorandum of understanding
(MOU), will mainly cover cross-border financial supervision and
is expected to take effect within two months from now, Taiwan's
Financial Supervisory Commission said in a statement.

Taiwan also aims to complete regulatory amendments to allow
Chinese banks to invest in the island's lenders, the
commission's chairman Sean Chen told a news conference, which
analysts said will help boost Taiwan's financial shares.

"We're preparing to make amendments to our regulations,"
Chen said. "Once the MOU becomes effective, Taiwan's banks will
be able to submit applications to set up branches in China."

The issue of most concern to investors -- details for
Taiwanese and Chinese financial firms investing in each other
-- will be discussed in a free trade pact, or the so-called
economic cooperation framework agreement (ECFA).

Taiwan aims to sign the ECFA early in 2010, the government
has said.

The financial services MOU comes as Taiwan and China have
agreed to open their financial markets to each other as part of
easing ties between the formal political rivals since Taiwan
President Ma Ying-jeou took office last year.

For details of the agreement in Chinese, please click
here
sID=38425&path=1736&LanguageType=1 Trade relations across
the Taiwan strait have thawed following a decades-long freeze,
with bilateral deals promoting tourism and shipping links
already concluded.

FURTHER EASING OF TIES

Taiwan's banks will be late comers to China's booming
market, which is dominated by powerful local and global players
such as Bank of China (3988.HK) (601988.SS) and HSBC (0005.HK)
(HSBA.L).

While the island's lenders such as Fubon (2881.TW),
Chinatrust (2891.TW) are strong in consumer banking businesses
such as credit cards and wealth management, they won't be able
to compete head-to-head with China's biggest players in the
near-term, analysts have said.

"The signing of the MOU is just the beginning of financial
cooperation on both sides," said Chu Yen-min, senior vice
president at Taiwan's KGI Securities.

"We're expecting more opening in the financial sector when
both parties sign the ECFA agreement," Chu said.

A flurry of acquisitions by Chinese banks are expected
after Taiwan seals the ECFA deal with China.

Cathay Financial (2882.TW), Fubon, Taishin (2887.TW) --
Taiwan's top three listed financial holding companies by assets
-- and top credit card issuer Chinatrust (2891.TW) are seen as
potential targets for China banks, analysts said.

China's top lenders, including Bank of China, Industrial &
Commercial Bank of China (1398.HK) and Bank of Communications
(3328.HK), would be interested in investing in their Taiwanese
counterparts, industry sources said.

Taiwan's banking and insurance sub-index .TFNI has jumped
55 percent so far this year on expectations the MOU will help
banks establish a foothold in the Chinese market.

The main index had climbed 70 percent during the
same period.
(Additional reporting By Roger Tung; Editing by Joseph Chaney
and Lee Chyen Yee)