Asian countries may benefit from capital controls to help limit inflows that pose a risk to their economies and financial systems, according to the Asian Development Bank (ADB).
Authorities should consider “the full array of policy measures available in their toolkit,” the Manila-based lender said in a report published yesterday. The Asia Capital Markets Monitor recommended “temporary and targeted” restraints on incoming investment in addition to encouraging outflows.
“Volatile capital flows pose a significant risk, affecting both macroeconomic management and overall financial stability,” ADB vice president B.N. Lohani said in a speech in Seoul yesterday. “The return of capital flows is welcome. But large and sudden capital movements can put the sustainability of economic recovery at risk.”
The recommendation comes after the IMF last month voiced its support for taxes on capital inflows to help stem excessive appreciation in some Latin American currencies. A UN agency this month also touted similar measures, saying China, India, Singapore, Indonesia and South Korea are most at risk to short-term capital swings.
Demand for higher-yielding assets in Asia has helped drive gains of more than 25 percent for Indonesia’s rupiah and South Korea’s won since the start of December 2008, the month the US Federal Reserve cut its benchmark interest rate to near zero.
The MSCI Asia Pacific Index of equities has risen 40.7 percent over the same period while government bonds gained 22 percent, based on HSBC Holdings PLC’s composite index of 10 Asian markets.
Net private capital inflows to Asia’s developing economies are expected to be US$272.4 billion this year, compared with US$282.9 billion last year, ADB said, citing a forecast by the Washington-based Institute of International Finance. The amount of money pouring into the region may strengthen as central banks from India to Malaysia start raising borrowing costs to fight inflation, widening the interest-rate differential with the US, Europe and Japan, ADB said.
Taiwan in November last year banned foreigners from parking their money in time-deposit accounts to counter speculation on its currency that may hurt exports. Brazil the month before slapped a levy on foreign purchases of stocks and bonds in a bid to restrain the real’s appreciation.
ADB estimates that foreign funds hold about 20 percent of stocks by value in Asia’s emerging markets. They owned 22.3 percent of local-currency government bonds in Indonesia, 13.3 percent in Malaysia and 3.9 percent in Thailand as of March 31, the report said.
South Korean deputy finance minister Yim Jong-yong said at a forum in Seoul yesterday that emerging economies should move to rein a surge in inflows of foreign-currency capitals that may pose a risk to their economies.
“Globally coordinated measures to stem volatile capital market moves will end the vicious cycle of foreign-exchange reserves build-up and worsening global imbalances,” Yim said.
South Korea can consider measures to levy taxes on short-term foreign capital inflows and tighten the regulations on local financial firms’ short-term external borrowings, Park Cyn-young, principal economist at the ADB, told reporters in Seoul.
Stock markets in Taiwan, South Korea and India have so far this year attracted more than US$14 billion from abroad, following net inflows of US$57.7 billion last year, exchange data show.
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
Intel Corp has named Tasha Chuang (莊蓓瑜) to lead Intel Taiwan in a bid to reinforce relations between the company and its Taiwanese partners. The appointment of Chuang as general manager for Intel Taiwan takes effect on Thursday, the firm said in a statement yesterday. Chuang is to lead her team in Taiwan to pursue product development and sales growth in an effort to reinforce the company’s ties with its partners and clients, Intel said. Chuang was previously in charge of managing Intel’s ties with leading Taiwanese PC brand Asustek Computer Inc (華碩), which included helping Asustek strengthen its global businesses, the company
Taiwanese suppliers to Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) are expected to follow the contract chipmaker’s step to invest in the US, but their relocation may be seven to eight years away, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. When asked by opposition Chinese Nationalist Party (KMT) Legislator Niu Hsu-ting (牛煦庭) in the legislature about growing concerns that TSMC’s huge investments in the US will prompt its suppliers to follow suit, Kuo said based on the chipmaker’s current limited production volume, it is unlikely to lead its supply chain to go there for now. “Unless TSMC completes its planned six
Power supply and electronic components maker Delta Electronics Inc (台達電) yesterday said it plans to ship its new 1 megawatt charging systems for electric trucks and buses in the first half of next year at the earliest. The new charging piles, which deliver up to 1 megawatt of charging power, are designed for heavy-duty electric vehicles, and support a maximum current of 1,500 amperes and output of 1,250 volts, Delta said in a news release. “If everything goes smoothly, we could begin shipping those new charging systems as early as in the first half of next year,” a company official said. The new
RSS