The central bank yesterday rejected suggestions that it use the nation’s foreign-exchange reserves to establish a sovereign wealth fund, saying the two differ in operations and objectives.
Local media reported last week that former minister without portfolio Schive Chi (薛琦) had called for the establishment of a sovereign wealth fund to better manage the nation’s forex reserves, raise their profitability and help narrow the nation’s deficit.
However, the central bank did not agree, issuing a 49-page reference report in response.
“There are foreign-exchange reserves to maintain stability in the foreign-exchange market,” the bank said in the report.
As such, the reserves are only used to invest in financial instruments that have a high degree of security and liquidity, although they offer lower returns, the report said.
Sovereign wealth funds, on the other hand, can afford to take higher risks in exchange for higher returns, the bank said.
Although the nation’s forex reserves hit a record US$423.45 billion at the end of last month, more than 70 percent of these were in the form of marketable securities and New Taiwan dollar deposits held by foreign portfolio investors, with the real operating amount only standing at US$121.8 billion, central bank data showed.
Given these concerns, it is not suitable to use forex reserves to establish a sovereign wealth fund, the bank said, adding that pension funds in Taiwan already operate like sovereign wealth funds.
The central bank added that maintaining a dynamic yet stable New Taiwan dollar exchange rate was beneficial to the development of the nation’s financial industry.
The remarks were in response to a statement earlier this month by Taiwan Academy of Banking and Finance chairman Shea Jia-dong (許嘉棟), who said that the central bank’s focus on maintaining a steady currency rate has hampered the nation’s bid to become a regional financial center.
Citing the examples of Hong Kong, Singapore and Switzerland, which have stable currencies, but thriving financial industries, the central bank said its exchange rate policy has not hindered market liberalization and the development of the nation’s financial service providers.
Moreover, after the global financial crisis in 2008, maintaining financial stability has become an even more important issue for major countries worldwide, the central bank said, adding that too much volatility might erode a nation’s financial stability.
PATENTS: MediaTek Inc said it would not comment on ongoing legal cases, but does not expect the legal action by Huawei to affect its business operations Smartphone integrated chips designer MediaTek Inc (聯發科) on Friday said that a lawsuit filed by Chinese smartphone brand Huawei Technologies Co (華為) over alleged patent infringements would have little impact on its operations. In an announcement posted on the Taiwan Stock Exchange, MediaTek said that it would not comment on an ongoing legal case. However, the company said that Huawei’s legal action would have little impact on its operations. MediaTek’s statement came after China-based PRIP Research said on Thursday that Huawei filed a lawsuit with a Chinese district court claiming that MediaTek infringed on its patents. The infringement mentioned in the lawsuit likely involved
Taipei is today suspending work, classes and its US$2.4 trillion stock market as Typhoon Gaemi approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed income trading, statements from its stock and currency exchanges said. Authorities had yesterday issued a warning that the storm could affect people on land and canceled some ship crossings and domestic flights. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) expects its local chipmaking fabs to maintain normal production, the company said in an e-mailed statement. The main chipmaker for Apple Inc and Nvidia Corp said it has activated routine typhoon alert
GROWTH: TSMC increased its projected revenue growth for this year to more than 25 percent, citing stronger-than-expected demand for AI devices and smartphones The Taiwan Institute of Economic Research (TIER, 台灣經濟研究院) yesterday raised its forecast for Taiwan’s GDP growth this year from 3.29 percent to 3.85 percent, as exports and private investment recovered faster than it predicted three months ago. The Taipei-based think tank also expects that Taiwan would see a 8.19 percent increase in exports this year, better than the 7.55 percent it projected in April, as US technology giants spent more money on artificial intelligence (AI) infrastructure and development. “There will be more AI servers going forward, but it remains to be seen if the momentum would extend to personal computers, smartphones and
Catastrophic computer outages caused by a software update from one company have once again exposed the dangers of global technological dependence on a handful of players, experts said on Friday. A flawed update sent out by the little-known security firm CrowdStrike Holdings Inc brought airlines, TV stations and myriad other aspects of daily life to a standstill. The outages affected companies or individuals that use CrowdStrike on the Microsoft Inc’s Windows platform. When they applied the update, the incompatible software crashed computers into a frozen state known as the “blue screen of death.” “Today CrowdStrike has become a household name, but not in