Taiwan’s economic fundamentals remain healthy with major business indicators at historical highs, and government policymaking heading in the right direction, ROC Premier Wu Den-yih said Aug. 8.
“The country’s economy will inevitably be affected by the U.S. public debt issue and this fallout may last for some time,” Wu said. “The government will leave no stone unturned in its efforts to weather this short-term storm.”
The premier made the remarks after the TAIEX, Taiwan’s benchmark stock market index, plunged more than 9 percent in the last two trading sessions to close at 7,552.8 points Aug. 8. The downturn saw market capitalization shrink NT$2.08 trillion (US$7.16 billion) in the first week of the month.
The local bourse has dropped 13.2 percent from Aug. 1 since the U.S. debt issue started making worldwide headlines in late July. Investors worried that a weak U.S. economy might result in a second global recession, triggering a selling stampede in major financial markets.
Sources familiar with the matter said Wu called an emergency meeting with senior cabinet officials Aug. 8 to discuss the government’s response to what could become a financial crisis.
“The Cabinet will continue keeping a close eye on market developments at home and abroad, but no specific intervention measures have been proposed,” the sources said.
Taiwan’s central bank also issued a statement Aug. 7 commenting on the recent downgrade of U.S. long-term creditworthiness by rating agency Standard & Poor’s.
The central bank questioned S&P’s decision, stating that such credit ratings are subjective and often cyclical in nature.
“Credit ratings are only one part of an assessment; investors should exercise prudence when employing such information,” the bank stated, urging investors not to overreact.
The central bank is also closely monitoring the New Taiwan dollar’s exchange rate, which has been trading within a 0.77-percent range against the greenback for the past two weeks. The local currency closed at NT$29.025 Aug. 8.
Write to Meg Chang at meg.chang@mail.gio.gov.tw