Taipei, May 19 (CNA) Last week's anti-Chinese protests in Vietnam that largely targeted Taiwanese firms may not have a major impact on the local technology and financial industries, according to research from Bank of America Merrill Lynch.
Though it is not clear how long the unrest, which turned violent May 13 amid tensions over the disputed South China Sea, will prevail, the Vietnamese government may not allow the protests to continue for too long in order to prevent a retreat of foreign investors, said Katherine Hu, a Taipei-based equity strategist at Merrill Lynch.
"Further, our consumer analyst does not expect the event to trigger a wage hike in Vietnam," she wrote in a note to clients dated May 14.
As for Taiwanese technology firms, contract electronics manufacturers Hon Hai Precision Industry Co. and Compal Electronics Inc. have not yet implemented plans to expand their operations in the Southeast Asian country.
Taiwan-based banks, meanwhile, have an estimated total credit exposure in Vietnam of about NT$79 billion (US$2.62 billion), representing only 0.37 percent of Taiwan's banking industry loans.
"As most Taiwan firms were early movers to the Vietnam market, with good profitability and balance sheets, we do not expect this event to bring any potential loss to Taiwan banks," Hu said.
Hu noted, though, that most Taiwanese facilities in Vietnam are in non-tech sectors such as textiles, shoe-making, petrochemicals and rubber. Some of these companies have been affected by the riots and shut down operations for several days.
Jasmine Lu, head of Taiwan research at Morgan Stanley, echoed the sentiment.
Lu said in a research note that the unrest in Vietnam will have a short-term impact on non-tech companies invested there, but the financial damage will be limited if the situation settles down soon.
At the same time, Taiwanese tech companies have been building up production sites in Vietnam over the past few years as they worry about tightening labor supply and labor wage hikes in China, she said.
These tech companies could be affected to some extent by the riots because their overall production scale in Vietnam remains small and given that some infrastructure such as electricity and logistics in Vietnam are not as efficient as in China, she said.
(By Jeffrey Wu)ENDITEM/WH
Related stories:●May 18: 224 Taiwanese companies in Vietnam damaged by anti-China protesters●May 18: Vietnam apologizes, mulling tax cuts for Taiwanese businesses (update)
(Click here for developments related to the anti-China protest-turned-riot in Vietnam.)