Taiwan Today

Taiwan is correct in warning investors about excessive speculation in stocks that fed the biggest rally in the island’s currency in five years, according to a U.N. official quoted by the central bank Jan. 20. “There’s much too much short-term capital flowing into Asia, not just Taiwan,” said Ajay Chhibber, regional director for Asia and the Pacific with the U.N. Development Programme. “The inflows are creating economic management problems.” Investors plowed a net US$2.4 billion into Taiwan shares this year, despite the central bank highlighting the merits of curbing inflows and reporting those with “excessive” currency holdings to regulators. Overseas funds snapped up US$15.6 billion of the island’s stocks last year. Chhibber said the optimal capital management strategy is to try and manage the influx of funds and attract long-term investment. “The inflows of speculative ‘hot money’ are affecting real economic recovery.” Concerning the central bank’s Jan. 4 statement, which stressed the benefits of capital controls and contained comments from Nobel Prize-winning economist Joseph Stiglitz that emerging-market countries should consider measures to reduce inflows, Chhibber praised the institution for its cautionary stance. “Emerging-market countries are speaking up and stating that they are worried about capital inflows,” he said. “This is good and there is nothing wrong with doing that.” (CYH-JSM)