Central bank Governor Perng Fai-nan (彭淮南) yesterday said he suspected that about NT$300 billion (US$9.3 billion) to NT$320 billion in speculative funds from overseas remained, although the size of idle funds parked in the domestic market has declined by NT$50 billion in the past month to the current level of NT$450 billion.
“Idle capital equivalent to about 3 percent of the local bourse’s market capitalization, or between NT$100 billion and NT$130 billion, would be acceptable as liquid capital,” Perng told the legislature’s Finance Committee.
He said the bank would continue to monitor the idle funds to see if they were being used to speculate on the currency, instead of investment in securities.
Perng said overseas capital inflows had been unusually high last week before Taipei inked a financial accord with Beijing on Monday night, but the flow of funds had eased in the past four days.
Therefore, the New Taiwan dollar’s appreciation in the past few days was the result of a weaker euro, not inflows of foreign funds, Perng said.
He said the media had also exaggerated the power of the memorandum of understanding (MOU) with China on financial cooperation, which would open up the local market to only about NT$30 billion in investment by Chinese qualified domestic institutional investors given the 10 percent investment limit in Taiwan’s stock market.
The central bank chief backed Premier Wu Den-yih’s (吳敦義) call that the government should not use any fiscal or monetary policy to curb the boom in the local property market.
Perng denied he had tried to pressure several banks during a “tea” meeting with their executives, dismissing media reports that he had asked the banks to avoid over-lending as it could fuel property speculation.
“In a very mild way, I only cautioned them about the overheated buying activity in properties in some areas,” he said.
Central bank statistics shows that property owners in Taipei had the highest loan to value ratio at 33.5 percent, close to that in Hong Kong at 34 percent, while the ratio outside Taipei is below 30 percent, Perng said.
He declined to comment when asked whether the central bank would keep interest rates unchanged before a full economic recovery in the middle of next year, as the government has predicted.
On cross-strait currency developments, the central bank chief said the cross-strait currency clearance pact would only be addressed when the MOU and proposed economic cooperation framework agreement with China takes effect.
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