Surplus Widens Yet TWD Weakens, Legislator Questions
Central Bank Governor Yang Chin-long led officials to the Legislative Yuan for a business report on the 28th. Democratic Progressive Party Legislator Wu Ping-jui questioned that, according to international trade theory, the currency of a surplus country should appreciate to achieve trade balance. Taiwan's surplus with the US has continued to increase, already breaking 2千億 last year and possibly even higher this year, yet the TWD against the US dollar has been relatively weak recently, asking the reason.
Yang Chin-long: Foreign Investor Profit-Taking and Fund Outflows
Yang Chin-long responded that Taiwan stocks performed well this year, rising all the way from 27000多點 to 49000多點, with gains concentrated mostly in chip and electronics stocks, which happen to be positions held more heavily by foreign investors. As foreign investors have reaped rich profits in Taiwan and need to regularly take profits, large fund flows moving out caused the TWD to depreciate. Wu Ping-jui followed up on whether it was related to higher US interest rates. Yang Chin-long said US dollar interest rates have always been higher than Taiwan's, mainly because US inflation is more severe than Taiwan's, not a situation that only emerged this year.
Inflation Breaking 2% and Consumer Confidence Draw Attention
Kuomintang Legislator Lai Shyh-bao questioned that in the consumer confidence survey released by National Central University, durables plunged 10.81點, including real estate and automobiles and motorcycles, and now a 110元 boxed meal can no longer buy good dishes, with the public generally feeling price increases. Yang Chin-long responded that durables account for only 1.627% weight in inflation, with little impact. Lai Shyh-bao stressed that inflation has now broken 2%, while Yang Chin-long said 2% is a reference value.
Denies Defense Line, Stresses Willow Principle of Regulation
Lai Shyh-bao asked whether there is a Yang Chin-long defense line for the exchange rate, and expressed concern that the central bank has already intervened in the forex market, asking whether it worries foreign investor stock selling will cause exchange rate volatility and whether vulture attacks were involved. Recently foreign investors heavily net sold Taiwan stocks by 2兆, drawing market attention. Yang Chin-long clarified that he has never had any so-called defense line, but the central bank's forex operations adopt the willow theory, the market can sway, and it will conduct appropriate regulation if the sway is too large. Currently he believes there are no vultures in the market, and fund flows remain in line with market norms. Regarding claims that Taiwan has been designated by the US as a currency manipulator, Yang Chin-long said the central bank communicates quite well with the US Treasury. Kuomintang Legislator Lin De-fu mentioned that some countries hope Taiwan will establish a sovereign wealth fund, and Taiwan's foreign exchange reserves are a strong advantage. Although President Lai Ching-te once said a sovereign wealth fund should be established, policy autonomy should be maintained and foreign exchange reserves should not be easily diverted. Yang Chin-long only responded that Taiwan has the strength to establish a sovereign wealth fund.