The nation’s foreign exchange reserves stood at US$281.13 billion at the end of last month, down US$957 million from August, with capital outflow blamed as the main reason for the decline, the central bank said yesterday.
Analysts said the amount would continue to drop if the global financial market turmoil persists, prompting foreign fund managers to pull more capital out of Asian markets.
“The foreign exchange reserves amounted to US$281.13 billion at the end of September,” Lin Sun-yuan (林孫源), deputy director-general of the central bank’s department of foreign exchange, told a press briefing. “The figure showed a decrease of US$957 million from the previous month, owing primarily to the repatriation of foreign capital.”
Foreign reserves hit a record high of US$291.4 billion in June and fell US$10.2 billion, or 3.5 percent, in the last three months, central bank data showed.
Kevin Hsiao (蕭正義), head of UBS Wealth Management Research in Taiwan, said foreign investors withdrew over NT$340 billion (US$10.6 billion) from Asian markets between June 1 and the middle of last month, and the capital outflow would escalate if world authorities fail to rein in the ongoing credit crisis.
“International investors consider Asian equity markets including Taiwan more risky and volatile than their US and European counterparts on the grounds that they are more susceptible to market disturbances,” Hsiao said by telephone.
Hsiao said that US share prices shed 21 percent so far this year while Asian stocks plunged more than 30 percent.
While the nation does not suffer any shortage of foreign reserves, the shrinking volume is definitely a negative sign as the drop also reflected a trade deficit, Hsiao said.
Liang Kuo-yuan (梁國源), president of Polaris Research Institute (寶華綜合經濟研究院), shared Hsiao’s views. Liang said the current size of foreign reserves is sufficient but it had better not drop below US$250 billion.
“The nation should maintain an adequate amount of foreign reserves in case it needs to cope with unexpected financial situations,” Liang said by telephone.
Liang also said the central bank should pay close attention to the local currency, which has fluctuated rather drastically against the greenback these days.
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