The central bank is likely to cut interest rates next week to stimulate the economy, although its benefits would be limited, as Taiwan does not suffer from a credit crunch, foreign financial institutes said.
“The central bank is poised for further rate cuts this month and in June when GDP readings might stay in negative territory due to feeble external demand,” Standard Chartered Bank’s Taipei-based economist Tony Phoo (符銘財) told a news conference.
Exports drive 70 percent of the nation’s GDP and poor export data thus far bode ill for the economy, which has slipped into a mild recession in the past two quarters and might not recover until the second half of this year, he said.
The languid state merits monetary easing that might help spur private investment, although the market is already swamped with funds due to an extended period of low borrowing costs, Phoo said.
Phoo said he expects the bank to lower the benchmark rediscount rate by 12.5 basis points to 1.5 percent from 1.625 percent.
Central bank Governor Perng Fei-nan (彭淮南) told lawmakers last week that he would respect board members on the issue and that a rate cut would help curb hot money inflows.
Foreign investors have raised net holdings in local shares by NT$74.03 billion (US$2.25 billion) so far this month as the European Central Bank’s new quantitative easing is driving global funds to emerging markets. Position increase amounted to NT$4.5 billion yesterday even though the TAIEX shed 1.56 percent to 8611.18, Taiwan Stock Exchange data showed.
The benign inflationary pressure lends support for rate cuts, Phoo said, adding that the headline consumer price index (CPI) registered a 2.4 percent increase last month, but core CPI climbed only 0.82 percent after stripping fruit, vegetable and oil prices.
A widening negative output gap would support a rate cut next week and beyond, Credit Suisse Group AG said.
The central bank have attributed the last two rate cuts to concerns over the deteriorating output gap, or differences between actual GDP figures and the nation’s growth potential.
Credit Suisse expects the output gap to reach 0.5 percent this year and ease slightly to 0.4 percent next year, suggesting lingering weak demand and a supply glut.
Disappointing exports in January and last month lend support to the gloomy forecast in which GDP would decline faster this quarter from the pace of 0.52 percent last quarter, the Swiss bank said.
Deutsche Bank voiced similar views, saying the central bank would embark on continued monetary easing with Taiwan stuck in recession.
A rate cut of 12.5 basis points would be in order next week as the central bank has distaste for drastic moves, the German lender said.
STEADY: Prices are to rebound following inventory rebuilding demand, TrendForce said, with Samsung Electronics Co further trimming capacity as it slashes DDR4 lines The contract prices of DRAM chips are to rise by as much as 18 percent sequentially this quarter — the first price upticks in about eight quarters — driven mainly by inventory rebuilding demand for DRAM chips used in mobile devices and PCs, TrendForce Corp (集邦科技) projected yesterday. The price rebound is led by a quarterly increase of mobile DRAM chips, which are to climb between 13 percent and 18 percent quarter-on-quarter this quarter, which has not been seen since the fourth quarter of 2021, the Taipei-based market researcher predicted. Likewise, the price of mainstream PC DDR4 DRAM is expected to bounce
CHINA NOT A FRIEND: ‘Newsflash: Democracy is good for your businesses,’ US Secretary of Commerce Gina Raimondo said as she gave a speech at a national defense forum US Secretary of Commerce Gina Raimondo on Saturday urged lawmakers, Silicon Valley and US allies to stop China from getting semiconductors and cutting-edge technologies key to national security. Speaking at an annual national defense forum in Simi Valley, California, Raimondo called Beijing “the biggest threat we’ve ever had” and stressed that “China is not our friend.” The world’s top two economies are locked in a fierce commercial and geopolitical rivalry, in which her department plays a leading role. In October, Raimondo unveiled a series of restrictions on the export of advanced chips to China, including those used in the development of artificial intelligence
A Hong Kong court postponed a court hearing on troubled Chinese property developer Evergrande Group’s (恆大集團) winding-up petition scheduled for yesterday until Jan. 29. Evergrande is trying to win support from its creditors for a plan to restructure more than US$300 billion in debt to stave off liquidation. The company’s lawyer told the court it was requesting an adjournment to “refine” its new debt restructuring plan. The Hong Kong High Court has postponed the hearing over Evergrande’s potential liquidation several times. Judge Linda Chan (陳靜芬) had said in October that yesterday’s hearing would be the last before a decision is handed down. Chan
SOLID FOUNDATION: Given its decades of expertise in megatronics, manufacturing and robotics, Japan has the wherewithal to create its own AI, Jensen Huang said Nvidia Corp plans to help build an artificial intelligence (AI) tech-related ecosystem in Japan to meet demand in a country eager to gain an edge in this emerging technology. The US company will seek to partner with Japanese research organizations, companies and start-ups to build factories for AI, Nvidia CEO Jensen Huang (黃仁勳) said yesterday during opening remarks in a meeting with Japanese Minister of Economy, Trade and Industry Yasutoshi Nishimura. The company is to set up an AI research laboratory, and invest in local start-ups and educate the public on using AI, Huang said. Huang earlier this week met with Japanese Prime