Taiwanese banks expanding to Cambodia, Vietnam, and the Philippines

Exposure to these markets grew 20% per year over 2015-2016.

According to Fitch, the Taiwanese banks' pivot away from China has coincided with a push into emerging markets (EM) across the rest of Asia-Pacific (APAC) - particularly Cambodia, Vietnam and the Philippines - as banks have sought to capitalise on rapid economic growth and high yields.

Here's more from Fitch:

EM APAC (excluding China) exposure is still only equivalent to 2.3% of system assets, but it grew by an average of around 20% per year over 2015-2016. The Taiwanese authorities are pushing for further increases.

Taiwan's regulator has planned an increase in banking lending to 18 economies across APAC, as part of a 'New Southbound Policy' announced in December 2016. Fitch expects lending to the Association of Southeast Asian Nations (ASEAN) to rise particularly sharply, by around 8% growth per year in 2017-2020, compared with growth of around 3% per year in domestic lending in 2014-2016.

Aggressive expansion in EM APAC is helping to diversify bank exposures away from China, but could create its own pressure on Taiwanese banks' loan quality, given that these markets are generally characterised by weak governance and a lack of transparency.