Central bank sets deadline to stop forex speculation
Updated: 2010-01-06 07:36
(HK Edition)
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TAIPEI: Aiming to drive foreign exchange speculators from the island, Taiwan's central bank has given overseas investors a one-week period as the limit within which they must, for the foreseeable future, use funds in the local currency allocated for stocks to purchase shares.
"They aren't welcome, if they don't buy stocks within a week," Spencer Lin, head of the central bank's foreign-exchange department, said by telephone yesterday, declining to identify the investors.
The Taiwanese dollar advanced to the highest in more than a year yesterday after improving ties with the mainland prompted the fastest inflows in three years. The central bank said yesterday it passed the names of foreign investors with "excessive" holdings of the local currency to the regulator to investigate.
"The government is always pretty negative on anyone who wants to speculate on foreign exchange," said Nicholas Yeo, head of Aberdeen Asset Management Co's head of Hong Kong and mainland equities, who helps manage $40 billion in Asian stocks. "There will be negative sentiments given that people parking there have to withdraw," he said.
Aberdeen's funds hold shares of the island's biggest companies, including Taiwan Semiconductor Manufacturing Co, according to data compiled by Bloomberg.
The Taiwan dollar climbed 0.3 percent to NT$31.805 as of the midday break, according to Taipei Forex Inc. It touched NT$31.731 yesterday, the strongest level since September 2008. The benchmark Taiex index added 0.04 percent to a 19-month high.
Foreign investors bought more Taiwan shares than they sold for a 10th day yesterday, after being net buyers of $15.6 billion in 2009, the most since 2006.
"I think they're still sensitive to letting their currency strengthen too far ahead of the rest of the region," said David Cohen, an economist at Action Economics in Singapore. "No one wants to lose competitiveness right now."
The Taiwan dollar has climbed 1.1 percent in the past month, the second-best performer among the 10 most actively traded currencies after the Indonesian rupiah. The island's financial account, which measures inflows of capital, swung to a surplus of $6.51 billion from a revised deficit of $6.38 billion a year earlier.
Foreigners have brought more capital into Taiwan than has been used to fund stock purchases, the central bank said in an e-mailed statement yesterday.
China Daily/Bloomberg News
(HK Edition 01/06/2010 page2)