The central bank announced late last night that it would slash required reserve ratios for local lenders to help stabilize the domestic financial market after the TAIEX tumbled another 295.85 points, or 4.9 percent, to close at 5,756.59, the lowest in nearly three years.
Central bank Governor Perng Fai-nan (彭淮南) said that the bank’s board reached the decision to cut the reserve ratios on passbook savings by 1.25 percentage points and that on time deposits by 0.75 points, beginning tomorrow, to inject liquidity into the capital markets.
“The adjustment will undo the rate hikes [announced on June 26 and which took effect on July 1],” Perng said. “It is intended to reflect falling inflationary pressures and ease concerns about an economic recession.”
The central bank’s move is expected to restore some NT$200 billion (US$6.23 billion) it took out from the financial markets following its monetary tightening three months ago.
Perng, who said in June that his prime task was to fight inflation, remained tight-lipped about interest rates except to reiterate that the bank would address the issue at its board meeting next Thursday.
Domestic interest rates remain relatively low compared with other Asian countries, the bank said.
Earlier in the day, the central bank pumped US$3.59 billion into the foreign-currency interbank market to defuse worries about a liquidity strain, as the Lehman Brothers’ financial woes dragged down the local bourse for the second consecutive day.
The benchmark TAIEX has shed 554 points, or 8.9 percent, this week. Some dealers forecast a short, one-day rally today, but added that a solid recovery appeared unlikely in light of the thin trading.
Alan Tseng (曾炎裕), an analyst at Capital Securities Corp (群益證券), said a rebound was likely today, but acknowledged that it was hard to predict whether the market had hit the bottom or when it would regain its upward momentum.
“Wall Street’s performance and other factors may have influenced [the local bourse] to a certain degree, but no one knows how long the impact will last,” Tseng said in a telephone interview.
Tseng said that trading volume was a better indicator of a potential recovery, adding that daily turnover must exceed NT$100 billion to achieve a sustainable rally.
Turnover was NT$82.43 billion yesterday. It has fluctuated between NT$60 billion and NT$85 billion in the last two months.
Winson Wang (王榮旭), an analyst at Marbo Securities Consultant Co (萬寶證券投顧), said the TAIEX had a fair chance of gaining ground today if the Fed decided to cut interest rates at its board meeting yesterday.
Wang said Taiwan’s monetary policymakers should also lower key interest rates next week to help restore investor confidence.
“A rate cut will help reduce mortgage loan costs,” Wang said by telephone.
“The central bank must not make further interest hikes, if it considers a downward adjustment undesirable,” he said.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by