Taiwan’s equities and currency markets may see wilder swings this week as the US’ credit rating downgrade and the EU’s deteriorating debt crisis deepen concerns about the nation’s export-reliant economy, academics said yesterday.
The TAIEX, which plunged 9.15 percent last week over worries about the global economic recovery, may need some time to digest Standard & Poor’s (S&P) downgrade of the US’ sovereign credit rating from “AAA” to “AA+” on Friday.
The New Taiwan dollar closed down at an almost four-month low against the US dollar on Friday after the local bourse dived 5.58 percent, its steepest slump since the 2008 global financial crisis.
“Factors that are unfavorable for the nation’s economic growth have recently become more evident,” Polaris Research Institute (寶華綜合經濟研究院) president Liang Kuo-yuan (梁國源) said by telephone.
The economy will likely slow faster than expected in the second half of the year, even if GDP growth manages to stay above 5 percent, Liang said.
The US and Europe, the world’s major markets for consumer electronics, will fare worse than expected given their economic performance in the first half of the year, Liang said, adding that their high unemployment rates would continue to curtail consumer spending.
“The equities market will remain unnerved in the near term, with the TAIEX taking its cues from Wall Street,” he said.
The Dow Jones Industrial Average inched up 0.5 percent on -Friday before S&P’s announcement of its US credit downgrade. For the week, the Dow Jones index was down 5.75 percent and the S&P 500 dropped 7.19 percent.
Last month, the Directorate-General of Budget, Accounting and Statistics trimmed its forecast for GDP growth to 5.01 percent this year from 5.06 percent estimated in May, even though the economy was stronger in the second quarter.
“That forecast implies a steeper slowdown in the second half when GDP growth may not exceed the 4 percent mark if external factors deteriorate further,” Liang said.
The uncertain economic outlook would likely weaken the local currency as institutional investors cut holdings, even though the US currency is losing its status as a safe haven, said Wu Chung-shu (吳中書), president of the Chung-Hua -Institution for Economic Research (中華經濟研究院).
The NT dollar may hover around NT$29 against the greenback for the rest of this year, after it approached NT$28.5 in the first half, as domestic economic growth momentum softens, Wu said.
However, Andy Wu (吳火生), chairman of Taishin Securities Investment Advisory Co (台新投信), was more optimistic. He said the US credit downgrade would have a more limited impact on the TAIEX than was widely expected.
“US government bonds at an ‘AA+’ rating remain safe,” Wu said. “Panic [stock] selling is unwarranted.”
UPDATED (3:40pm): A suspected gas explosion at a shopping mall in Taichung this morning has killed four people and injured 20 others, as emergency responders continue to investigate. The explosion occurred on the 12th floor of the Shin Kong Mitsukoshi in Situn District (西屯) at 11:33am. One person was declared dead at the scene, while three people were declared deceased later after receiving emergency treatment. Another 20 people sustained major or minor injuries. The Taichung Fire Bureau said it received a report of the explosion at 11:33am and sent rescuers to respond. The cause of the explosion is still under investigation, it said. The National Fire
ACCOUNTABILITY: The incident, which occured at a Shin Kong Mitsukoshi Department Store in Taichung, was allegedly caused by a gas explosion on the 12th floor Shin Kong Group (新光集團) president Richard Wu (吳昕陽) yesterday said the company would take responsibility for an apparent gas explosion that resulted in four deaths and 26 injuries at Shin Kong Mitsukoshi Zhonggang Store in Taichung yesterday. The Taichung Fire Bureau at 11:33am yesterday received a report saying that people were injured after an explosion at the department store on Section 3 of Taiwan Boulevard in Taichung’s Situn District (西屯). It sent 56 ambulances and 136 paramedics to the site, with the people injured sent to Cheng Ching Hospital’s Chung Kang Branch, Wuri Lin Shin Hospital, Taichung Veterans General Hospital or Chung
‘TAIWAN-FRIENDLY’: The last time the Web site fact sheet removed the lines on the US not supporting Taiwanese independence was during the Biden administration in 2022 The US Department of State has removed a statement on its Web site that it does not support Taiwanese independence, among changes that the Taiwanese government praised yesterday as supporting Taiwan. The Taiwan-US relations fact sheet, produced by the department’s Bureau of East Asian and Pacific Affairs, previously stated that the US opposes “any unilateral changes to the status quo from either side; we do not support Taiwan independence; and we expect cross-strait differences to be resolved by peaceful means.” In the updated version published on Thursday, the line stating that the US does not support Taiwanese independence had been removed. The updated
‘LAWFUL USE’: The last time a US warship transited the Taiwan Strait was on Oct. 20 last year, and this week’s transit is the first of US President Donald Trump’s second term Two US military vessels transited the Taiwan Strait from Sunday through early yesterday, the Ministry of National Defense said in a statement, the first such mission since US President Donald Trump took office last month. The two vessels sailed south through the Strait, the ministry said, adding that it closely monitored nearby airspace and waters at the time and observed nothing unusual. The ministry did not name the two vessels, but the US Navy identified them as the Arleigh Burke-class guided-missile destroyer USS Ralph Johnson and the Pathfinder-class survey ship USNS Bowditch. The ships carried out a north-to-south transit from