Despite concerns over the nation's public finances and cross-strait tensions, Fitch Ratings yesterday maintained its sovereign credit rating on Taiwan at "A+" with a stable outlook.
The international rating agency said it decided to keep Taiwan's rating unchanged given its strong foreign exchange reserves and large holdings of external assets relative to GDP.
But Fitch cautioned that both politics and public finances could still obstruct growth.
"Taiwan's election calendar is full, not to mention cross-straits issues are always in focus," James McCormack, head of Asia sovereign ratings at Fitch, told its annual Asian Sovereign and Banking Conference in Taipei yesterday.
On the public finance front, Fitch's data showed that the nation's government debt ratio was on the rise and expected to hit 43.3 percent of GDP this year.
The figure surpassed the median values of below 35 percent for all "A" rated countries, McCormack said. In fact, Taiwan's debt level is going up while other "A" rated countries' debt levels are going down, he said.
In response to Fitch's warning, the Ministry of Finance said that the government saw a stable growth in tax revenues in the first half of this year and expects tax revenues this year to exceed its target by NT$60 billion (US$1.82 billion).
As the government has tightened control over expenditures, the ministry expects the government deficit to account for less than 1 percent of GDP this year, the ministry said in a statement posted on its Web site.
The ministry added that the government deficit for fiscal year 2008 of NT$97.9 billion would be NT$41.8 billion, or 29.9 percent, lower than the NT$139.7 billion deficit recorded in fiscal year 2007.
In general, McCormack said that Taiwan and the rest of the region were well placed to deal with credit market adjustments, "given the large stock of foreign exchange reserves, strong balance of payments positions and more flexible exchange rate regimes."
Still, this does not exempt the region from being vulnerable to slowdowns in global economic growth and large capital inflows in recent years could test regional policymakers if investor sentiment changes quickly, he said.
Commenting on the local financial sector, the ratings agency said that the profitability of local banks was weakening on slowing loan growth and narrowing interest margins.
Joyce Huang (
Total loan growth in the first half of the year rose only 2.5 percent from the same period last year, she said.
Growth last year was also slow at 2.5 percent, compared with 8.3 percent in 2005 and 10.1 percent in 2004.
Wealth management and offshore banking will become the key growth drivers for banks, she said.
The wealth management sector, including deposits, mutual funds and equities, continue to be in demand among investors, she said.
On the US subprime lending issue, Fitch said it would not have a large impact on Asian banks given their relatively low subprime-related investment.
The largest exposure held by a Taiwanese bank is only 7 percent of equity, said David Marshall, Fitch's managing director of Asia-Pacific financial institutions.
A Thai bank has the highest exposure among Asian banks, at around 20 percent of equity, he said.
However, concerns over the indirect effects from providing liquidity to conduits and investors' losses in banks' asset management arms remain, he said.
In Italy’s storied gold-making hubs, jewelers are reworking their designs to trim gold content as they race to blunt the effect of record prices and appeal to shoppers watching their budgets. Gold prices hit a record high on Thursday, surging near US$5,600 an ounce, more than double a year ago as geopolitical concerns and jitters over trade pushed investors toward the safe-haven asset. The rally is putting undue pressure on small artisans as they face mounting demands from customers, including international brands, to produce cheaper items, from signature pieces to wedding rings, according to interviews with four independent jewelers in Italy’s main
Japanese Prime Minister Sanae Takaichi has talked up the benefits of a weaker yen in a campaign speech, adopting a tone at odds with her finance ministry, which has refused to rule out any options to counter excessive foreign exchange volatility. Takaichi later softened her stance, saying she did not have a preference for the yen’s direction. “People say the weak yen is bad right now, but for export industries, it’s a major opportunity,” Takaichi said on Saturday at a rally for Liberal Democratic Party candidate Daishiro Yamagiwa in Kanagawa Prefecture ahead of a snap election on Sunday. “Whether it’s selling food or
CONCERNS: Tech companies investing in AI businesses that purchase their products have raised questions among investors that they are artificially propping up demand Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday said that the company would be participating in OpenAI’s latest funding round, describing it as potentially “the largest investment we’ve ever made.” “We will invest a great deal of money,” Huang told reporters while visiting Taipei. “I believe in OpenAI. The work that they do is incredible. They’re one of the most consequential companies of our time.” Huang did not say exactly how much Nvidia might contribute, but described the investment as “huge.” “Let Sam announce how much he’s going to raise — it’s for him to decide,” Huang said, referring to OpenAI
The global server market is expected to grow 12.8 percent annually this year, with artificial intelligence (AI) servers projected to account for 16.5 percent, driven by continued investment in AI infrastructure by major cloud service providers (CSPs), market researcher TrendForce Corp (集邦科技) said yesterday. Global AI server shipments this year are expected to increase 28 percent year-on-year to more than 2.7 million units, driven by sustained demand from CSPs and government sovereign cloud projects, TrendForce analyst Frank Kung (龔明德) told the Taipei Times. Demand for GPU-based AI servers, including Nvidia Corp’s GB and Vera Rubin rack systems, is expected to remain high,
RSS