OREANDA-NEWS. Fitch Ratings has affirmed the National Fund Credit Quality Ratings on Taiwan-based Taishin 1699 Money Market Fund (Taishin 1699 MMF), Taishin Ta-Chong Money Market Fund (Taishin Ta-Chong MMF), and Taishin Lucky Money Market Fund (Taishin Lucky MMF) at 'AA+(twn)' and their Volatility Ratings at 'V1(twn)', The agency has simultaneously withdrawn the National Fund Credit Quality Rating and the Volatility Rating of Taishin Lucky MMF as the ratings are no longer considered to be relevant to the agency's coverage.

KEY RATING DRIVERS

The affirmation of the National Fund Credit Quality Rating reflects the funds' high credit quality with a weighted average rating factor (WARF) of 0.32 for Taishin 1699 MMF, 0.28 for Taishin Ta-Chong MMF and 0.34 for Taishin Lucky MMF at end-September 2015. The funds' assets had ratings ranging from 'BBB+(twn)' to 'AAA(twn)'. The WARFs would imply a credit quality rating of 'AAA(twn)' for all three funds, but the ratings have been capped at 'AA+(twn)' to reflect the exposure to 'BBB+(twn)'-rated securities, moderate issuer concentration and high concentration in banking and finance sector.

The affirmation of the National Fund Volatility Rating is driven by the funds' low exposure to interest rate risk and spread risk, as reflected in their short maturity profiles.

ASSET CREDIT QUALITY

The portfolios have high average credit quality, as measured by their WARFs of 0.28 to 0.34, with over 90% of assets rated in the 'A(twn)' to 'AAA(twn)' range in all three funds at end-September 2015. Between 8% and 9% of each of the funds' assets were on Negative Rating Outlook or Rating Watch Negative at end-September 2015. Fitch considers that downgrades of these exposures are unlikely to substantially alter the credit quality of the portfolios, all else being equal, given the exposures are modest and most of them related to highly-rated issuers or counterparties.

Fitch considers the funds to be "moderately concentrated" in terms of issuers, based on the definitions in its rating criteria. The top five issuers represent slightly above 50% of the assets under management (AUM) in all three funds. The funds also have high industry concentration in the Taiwanese banking and finance sector, whose credit Outlook is broadly Stable.

PORTFOLIO SENSITIVITY TO MARKET RISK

The funds have low exposure to interest rate and spread risks, given the portfolio assets' short weighted-average maturity of 71-88 days at end-September 2015, much lower than peers'.

INVESTMENT ADVISOR

All three funds are advised by Taishin Securities Investment Trust Co., Ltd (TSIT). The investment advisor is wholly owned by Taishin Financial Holding Co., Ltd. (BBB/Stable/A+(twn)).

Fitch considers the investment advisor suitably qualified, competent and capable of managing the fund. TSIT has experienced asset management staff and stable investment processes. Its investment ideas are research driven and implementation is overseen by its investment committee.

FUND PROFILE

The funds invest in time deposits, certificates of deposit, commercial paper, repos or short-term bonds. The funds may engage in repurchase agreements backed by government-issued securities at collateralisation level below 100%. This is in line with the local-market practice. Taishin 1699 MMF is one of the largest money market funds in Taiwan with TWD51.2bn of assets at end-September 2015 (equivalent to 5.8% of the domestic listed money market fund assets). Taishin Ta-Chong MMF and Taishin Lucky MMF are medium-sized money market funds in Taiwan with TWD11.1bn and TWD5.3bn of assets respectively, at end-September 2015 (equivalent to 1.2% and 0.6% of the market).

RATING SENSITIVITY AND SURVEILLANCE

The ratings on Taishin 1699 MMF and Taishin Ta-Chong MMF may be sensitive to significant changes in the credit quality or market risk profile of the fund. A significant adverse deviation from Fitch's guidelines for any key rating driver could lead to a rating downgrade. Specifically, Fitch would expect to downgrade the National Fund Credit Quality Ratings if credit quality deteriorates or the fund changes its investment practices substantially to allow it to invest a larger portion of its portfolio in lower-rated assets. The fund's rating would also be sensitive to deterioration in the credit quality of the Taiwanese banking sector, given its large exposure to that sector.

Fitch expects the National Fund Volatility Ratings of the funds to remain stable, given the fairly short maturity profile of the fund. However, should interest rates or market volatility in Taiwan structurally change, or the maturity profiles of the funds be substantially extended, then Fitch would expect to downgrade the National Fund Volatility Ratings.

The sensitivities for the ratings on Taishin Lucky MMF are no longer relevant as the ratings have been withdrawn.

To maintain bond fund ratings, TSIT, the manager of the fund, provides Fitch with monthly information, including details of the portfolios' holdings, credit quality and transactions. Fitch monitors the credit composition of the portfolios, the credit counterparties used by the manager and the overall market risk profile of the investments.

For additional information about Fitch rating criteria applicable to bond funds, see the criteria referenced below at www.fitchratings.com.

Comparisons between different national fund rating scales or between an individual national and international scale are inappropriate.