Short-term foreign capital has once again flowed into Taiwan this year, with about NT$50 billion (US$1.69 billion) in “hot money” at the end of last month, central bank Governor Perng Fai-nan (彭淮南) said yesterday.
Based on the central bank’s statistics, foreign investors had parked about NT$170 billion in Taiwan as of Feb. 29. After deducting NT$120 billion in working capital, short-term capital inflows believed to be hot money totaled about NT$50 billion.
The amount was substantially lower than the NT$370 billion in hot money during the same period last year. However, Perng said the bank would continue to rein in the excessive volatility of such -speculative funds, to protect the national economy and financial system.
Photo: Lin Cheng-kun, Taipei Times
“A large amount of short-term capital flowing in and out frequently [by foreign investors] will cause excessive volatility in the exchange rate of the local currency,” Perng said during a legislative question-and-answer session.
There are more than 6,000 foreign investors in Taiwan, but the 20 who move capital most frequently account for as much as 36 percent of the total, the bank’s statistics showed.
With the addition of foreign-held capital invested in the stock market, the market value of securities investments and deposits held by foreign portfolios totaled US$221.7 billion as of last month, equivalent to 56.2 percent of the nation’s foreign exchange reserves, which were US$394.43 billion last month, according to the bank’s data.
Perng said hot money would remain a problem in Taiwan and other major emerging markets this year, given the speculative capital’s potential impact on currency exchange rates and stock markets in those countries.
Rising crude oil prices and China’s slowing economy would be two major challenges for the local economy this year, he said.
Although the nation’s headline inflation rose at a modest 1.31 percent in the first two months of the year compared with last year, the continued rise in global oil prices could raise domestic inflationary pressure.
Furthermore, China’s recent downward revision of its GDP growth forecast for this year to 7.5 percent, down 0.5 percentage points from last year and the lowest level in eight years, has also has raised concerns among Taiwanese officials.
Chinese Nationalist Party (KMT) legislators Lai Shyh-bao (賴士葆) and Lo Ming-tsai (羅明才) said that the central bank did not hold enough gold and was therefore unable to earn sufficient income for the nation’s coffers.
Perng said the amount of gold held by Taiwan’s central bank was higher than that in most other countries.
As of the end of last month, the central bank held 13.58 million ounces of gold, accounting for 5.65 percent of the nation’s foreign exchange reserves, a level that was appreciably higher than that of other major Asian countries.
For example, the amount of gold held by South Korea accounted for 0.9 percent of its foreign exchange reserves during the same period, while that of Japan was 3.17 percent and China’s 1.68 percent, Perng said.
Separately, Perng said Taiwan is ready to conclude a currency -settlement agreement with China, but admitted there had been no progress on the matter since 2010 when the two sides started negotiations.
“I hope this pact can be concluded sooner rather than later,” he said.
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