The central bank was on a public relations mission last week to remind worried consumers and businesses that the domestic financial market was functioning well and there would be no liquidity shortage despite concerns about a possible trickle-down effect from the US' subprime mortgage woes.
The Financial Supervisory Commission also said banks, insurers and securities investment trust firms would only have limited losses from exposure to US subprime mortgage-related instruments. It said that preliminary results of its survey of domestic financial institutions showed potential losses from exposure to subprime mortgage-related products totaled about NT$2.5 billion (US$75.9 million).
Such confidence could be misplaced.
International ratings agencies, including Standard and Poor's, Fitch Ratings and Moody's, have estimated that Taiwanese financial institutions may face losses ranging from NT$3.75 billion to NT$7 billion.
The biggest problem facing the market, however, is uncertainty -- a feeling that no one knows how serious the subprime debt concerns are, how much they will spread and whether financial institutions will be able to handle the losses.
The problem is there's no clear indication of when such fears will stop affecting market sentiment. The fact that the central banks of several major nations worked together last week to calm money markets was a sign that the real situation may be worse.
The problems associated with the US subprime mortgage market were well documented earlier this year. Less well understood, however, is how the monetary authorities and investors all over the world would respond to these problems -- starting with defaulted subprime loans and then growing into broader market turmoil due to trading of high-yield but risky collateralized debt obligations and other subprime mortgage-based derivatives.
Governments around the world are trying to calm market fears. It may take days, weeks or even months to completely rebuild market confidence worldwide. We need to monitor the situation as the US subprime mortgage crisis will probably impact on housing markets, slow private consumption, erode market sentiment and reduce global economic growth.
Therefore, the central bank should continue monitoring the nation's liquidity status and calm the market with its latest risk assessments in a timely and transparent manner.
Perhaps a better remedy to protect investors from rampant speculation on subprime debt-related losses is for the commission to require domestic financial institutions to specify just how much of their investments are linked to the US subprime market and provide their most accurate estimates of possible losses.
As borrowing costs have been rising and banks have tightened mortgage lending, investors should also recognize that the local real estate market may cool.
We have seen significant price increases in properties across the globe in recent years, as well as concerns that more countries could see the property bubble burst.
While the growth in the real estate market varies from country to country, there has been one thing in common in all these markets: Growth has been driven by investors chasing quick profits. This growth is likely to disappear as soon as investors realize their profits could vaporize.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry