Should You Shift to Financial Stocks? Mega Financial Hits Record High — 'Invincible Guru' Reveals 'This State-Owned Stock Is Much Sweeter': Far More Attractive

Taiwan's stock market has recently seen intense volatility. After a sharp sell-off, it surged 3,186 points last Friday — the largest single-day gain in history — only to sharply reverse in overnight trading. Amid this turbulence, technology stocks have swung wildly, while financial stocks have shown resilience, drawing investor interest as a defensive play.

Chen Chong-ming, a financial writer known as the 'Invincible Guru,' noted that Mega Financial has risen strongly to over NT$53, but compared to other state-owned financial holding companies, another financial stock — though smaller in scale — offers a lower price-to-earnings (P/E) ratio and higher dividend yield, making it 'much more attractive.'

In a Facebook post, Chen stated that Mega Financial has climbed past the NT$53.1 mark. Amid market volatility, state-owned financial holding companies (guan-gu jin-kong) offer strong defensive qualities. But with share prices now high, investors face a choice: should they take profits or continue holding?

Chen analyzed Mega Financial's earnings: it earned NT$1.51 in the first seven months. At a share price of NT$53.1, this gives a P/E ratio of 20.5x. However, financial firms typically write down bad loans at year-end, so the P/E ratio is likely to rise further by year-end, making the current valuation 'somewhat expensive.'

In contrast, Chang Hwa Bank — another state-owned financial institution — earned NT$0.94 in the same period. At a share price of NT$25.2, its P/E ratio is 15.6x, clearly cheaper than Mega Financial.

Looking at dividends, Mega Financial pays NT$1.75 per share, resulting in a dividend yield of just 3.3% — 'not attractive at all,' according to Chen. Chang Hwa Bank, on the other hand, pays NT$1.05 (NT$0.80 in cash + NT$0.25 in stock), yielding 4.2%, making it more appealing than Mega Financial.

Chen bluntly concluded: 'Mega Financial, as the leader among state-owned financials, attracts safe-haven capital during market crashes, pushing its price up and resulting in high P/E and low dividend yield. Compared to Mega Financial — the 'noble lady' — Chang Hwa is just a 'modest beauty,' but with lower P/E and higher dividend yield, it's far more appetizing.'

He added, 'I'm not taking responsibility for this analysis, but if it were me, I'd sell all my Mega Financial shares and buy Chang Hwa instead.' One share of Mega Financial can be exchanged for 2.1 shares of Chang Hwa, yielding NT$1.69 in cash dividends and NT$0.53 in stock dividends — totaling NT$2.21 annually. This is a 26.4% increase compared to Mega Financial's NT$1.75 cash dividend.

Chen emphasized: 'High P/E and low dividend yield will eventually correct over time. Low P/E and high dividend yield stocks will eventually get their due market recognition. When it comes to state-owned banks, for long-term investment, I'll always pick the one that's cheap (low P/E) and high quality (high dividend yield).'