Taiwan has caught a MOU fever
Central News Agency
2010-01-13 12:25 PM
Central News Agency
Four days before a Taiwan-China memorandum of understanding (MOU) on financial cooperation is to take effect Jan. 16, the Central Bank of the Republic of China (Taiwan) issued a statement stressing its resolve to tighten controls on international capital. It revealed its intention to levy a hot money tax on cross-border financial transactions to fend off a sharp appreciation of the local currency and an asset bubble.
The following are excerpts from local media coverage of the issue: The China Times: Brazil is the only country in the world that imposes a 2 percent tax on hot money that flows in. Just as a cross-Taiwan Strait financial MOU is to take effect, the central bank is discussing with the Financial Supervisory Commission the possibility of slashing the amount of money that Chinese qualified domestic institutional investors (QDIIs) can invest in Taiwan's stock market from NT$30 billion (US$944 million) to about NT$15 billion in the initial stage.
According to sources, what the central bank actually cares about is not the NT$15 billion in Chinese capital, but that a wide opening at the start would fan a new entry of larger amounts of speculative capital that has just been contained. To avoid a repeat of the hot money influx, the central bank has been assessing the possibility of levying a "hot money tax" or adopting stricter administrative measures to serve that end, the sources said.
Government officials said the hot money tax plan is a good way to ward off a continued inflow of international capital and an asset bubble, but it may not be able to be put into place in a timely way because of the typically drawn out legislative process. They feel it is a better idea than renewing a capital account management mechanism, which could hurt Taiwan's image and dent foreign interest in investing in Taiwan.
Although Yuanta Financial Holding Chairman Yen Ching-chang, who has previously served as minister of finance, voiced support for the central bank's plan because it would help stabilize the value of the Taiwan dollar and consumer prices, the top brass of other financial holding companies warned that a hot money tax or controls on capital accounts would be "too remote." To prevent speculative money from continuing to flow in, they said more effective measures have to be taken. (Jan. 13, 2010).
The Economic Daily News: Central Bank Governor Perng Fai-nan again issued a statement Jan.
12 to underscore his resolve to take necessary measures, including management of capital accounts, to ward off sharp asset fluctuations in the local emerging equity and property markets. He pointed to Brazil as an example.
A government official said, "Hot money aims to swiftly take profits in specific markets, and it will never be long-term investment capital in these places, " and it is understood that the central bank may ask potential speculative investors to invest a certain amount of their capital in the local bourse within a limited time.
If they don't, they will be asked to send it out of the country or deposit it in a non-interest-earning central bank account. The other option would be to require foreign speculators to remit their funds out of the country only after they have been invested in the local bourse for a certain period.
The central bank said Jan. 12 there are several ways to deal with speculative capital, including moral persuasion. The bank reminded both investors and speculators that it "has began to pay attention to the issue." (Jan. 13, 2010) The United Daily News: Over the past 15 trading days, foreign investors have bought a net NT$133.3 billion in shares on Taiwan's stock exchange -- the fourth-largest consecutive net buy value in Taiwan's history. The weighted index finished 14 points lower Tuesday to close at 8,309 -- above the 8,300-point key level.
Peter Kurz, managing director of Citigroup Global Market Inc., Taipei Branch, remained cautiously optimistic about the prospects of the local stock market. He said the momentum brought by foreign capital has yet to come to an end and suggested that the benchmark index might surge to a peak of around 9,450 points in the first half of this year. He said he was more reserved about the market's performance in the second half of 2010.
Daniel Chang, a research chief at Macquarie Securities Limited, said Taiwan's stock prices are no longer cheap as the weighted index has risen to above 8,300 points. It is hard to predict whether cross-strait exchanges will definitely create additional value for Taiwan's stocks, he said. (Jan. 13, 2010) (By Flor Wang)
Central News Agency
2010-01-13 12:25 PM
Central News Agency
Four days before a Taiwan-China memorandum of understanding (MOU) on financial cooperation is to take effect Jan. 16, the Central Bank of the Republic of China (Taiwan) issued a statement stressing its resolve to tighten controls on international capital. It revealed its intention to levy a hot money tax on cross-border financial transactions to fend off a sharp appreciation of the local currency and an asset bubble.
The following are excerpts from local media coverage of the issue: The China Times: Brazil is the only country in the world that imposes a 2 percent tax on hot money that flows in. Just as a cross-Taiwan Strait financial MOU is to take effect, the central bank is discussing with the Financial Supervisory Commission the possibility of slashing the amount of money that Chinese qualified domestic institutional investors (QDIIs) can invest in Taiwan's stock market from NT$30 billion (US$944 million) to about NT$15 billion in the initial stage.
According to sources, what the central bank actually cares about is not the NT$15 billion in Chinese capital, but that a wide opening at the start would fan a new entry of larger amounts of speculative capital that has just been contained. To avoid a repeat of the hot money influx, the central bank has been assessing the possibility of levying a "hot money tax" or adopting stricter administrative measures to serve that end, the sources said.
Government officials said the hot money tax plan is a good way to ward off a continued inflow of international capital and an asset bubble, but it may not be able to be put into place in a timely way because of the typically drawn out legislative process. They feel it is a better idea than renewing a capital account management mechanism, which could hurt Taiwan's image and dent foreign interest in investing in Taiwan.
Although Yuanta Financial Holding Chairman Yen Ching-chang, who has previously served as minister of finance, voiced support for the central bank's plan because it would help stabilize the value of the Taiwan dollar and consumer prices, the top brass of other financial holding companies warned that a hot money tax or controls on capital accounts would be "too remote." To prevent speculative money from continuing to flow in, they said more effective measures have to be taken. (Jan. 13, 2010).
The Economic Daily News: Central Bank Governor Perng Fai-nan again issued a statement Jan.
12 to underscore his resolve to take necessary measures, including management of capital accounts, to ward off sharp asset fluctuations in the local emerging equity and property markets. He pointed to Brazil as an example.
A government official said, "Hot money aims to swiftly take profits in specific markets, and it will never be long-term investment capital in these places, " and it is understood that the central bank may ask potential speculative investors to invest a certain amount of their capital in the local bourse within a limited time.
If they don't, they will be asked to send it out of the country or deposit it in a non-interest-earning central bank account. The other option would be to require foreign speculators to remit their funds out of the country only after they have been invested in the local bourse for a certain period.
The central bank said Jan. 12 there are several ways to deal with speculative capital, including moral persuasion. The bank reminded both investors and speculators that it "has began to pay attention to the issue." (Jan. 13, 2010) The United Daily News: Over the past 15 trading days, foreign investors have bought a net NT$133.3 billion in shares on Taiwan's stock exchange -- the fourth-largest consecutive net buy value in Taiwan's history. The weighted index finished 14 points lower Tuesday to close at 8,309 -- above the 8,300-point key level.
Peter Kurz, managing director of Citigroup Global Market Inc., Taipei Branch, remained cautiously optimistic about the prospects of the local stock market. He said the momentum brought by foreign capital has yet to come to an end and suggested that the benchmark index might surge to a peak of around 9,450 points in the first half of this year. He said he was more reserved about the market's performance in the second half of 2010.
Daniel Chang, a research chief at Macquarie Securities Limited, said Taiwan's stock prices are no longer cheap as the weighted index has risen to above 8,300 points. It is hard to predict whether cross-strait exchanges will definitely create additional value for Taiwan's stocks, he said. (Jan. 13, 2010) (By Flor Wang)