Despite concerns over the nation's public finances and cross-strait tensions, Fitch Ratings yesterday maintained its sovereign credit rating on Taiwan at "A+" with a stable outlook.
The international rating agency said it decided to keep Taiwan's rating unchanged given its strong foreign exchange reserves and large holdings of external assets relative to GDP.
But Fitch cautioned that both politics and public finances could still obstruct growth.
"Taiwan's election calendar is full, not to mention cross-straits issues are always in focus," James McCormack, head of Asia sovereign ratings at Fitch, told its annual Asian Sovereign and Banking Conference in Taipei yesterday.
On the public finance front, Fitch's data showed that the nation's government debt ratio was on the rise and expected to hit 43.3 percent of GDP this year.
The figure surpassed the median values of below 35 percent for all "A" rated countries, McCormack said. In fact, Taiwan's debt level is going up while other "A" rated countries' debt levels are going down, he said.
In response to Fitch's warning, the Ministry of Finance said that the government saw a stable growth in tax revenues in the first half of this year and expects tax revenues this year to exceed its target by NT$60 billion (US$1.82 billion).
As the government has tightened control over expenditures, the ministry expects the government deficit to account for less than 1 percent of GDP this year, the ministry said in a statement posted on its Web site.
The ministry added that the government deficit for fiscal year 2008 of NT$97.9 billion would be NT$41.8 billion, or 29.9 percent, lower than the NT$139.7 billion deficit recorded in fiscal year 2007.
In general, McCormack said that Taiwan and the rest of the region were well placed to deal with credit market adjustments, "given the large stock of foreign exchange reserves, strong balance of payments positions and more flexible exchange rate regimes."
Still, this does not exempt the region from being vulnerable to slowdowns in global economic growth and large capital inflows in recent years could test regional policymakers if investor sentiment changes quickly, he said.
Commenting on the local financial sector, the ratings agency said that the profitability of local banks was weakening on slowing loan growth and narrowing interest margins.
Joyce Huang (
Total loan growth in the first half of the year rose only 2.5 percent from the same period last year, she said.
Growth last year was also slow at 2.5 percent, compared with 8.3 percent in 2005 and 10.1 percent in 2004.
Wealth management and offshore banking will become the key growth drivers for banks, she said.
The wealth management sector, including deposits, mutual funds and equities, continue to be in demand among investors, she said.
On the US subprime lending issue, Fitch said it would not have a large impact on Asian banks given their relatively low subprime-related investment.
The largest exposure held by a Taiwanese bank is only 7 percent of equity, said David Marshall, Fitch's managing director of Asia-Pacific financial institutions.
A Thai bank has the highest exposure among Asian banks, at around 20 percent of equity, he said.
However, concerns over the indirect effects from providing liquidity to conduits and investors' losses in banks' asset management arms remain, he said.
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
Nvidia Corp’s demand for advanced packaging from Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) remains strong though the kind of technology it needs is changing, Nvidia CEO Jensen Huang (黃仁勳) said yesterday, after he was asked whether the company was cutting orders. Nvidia’s most advanced artificial intelligence (AI) chip, Blackwell, consists of multiple chips glued together using a complex chip-on-wafer-on-substrate (CoWoS) advanced packaging technology offered by TSMC, Nvidia’s main contract chipmaker. “As we move into Blackwell, we will use largely CoWoS-L. Of course, we’re still manufacturing Hopper, and Hopper will use CowoS-S. We will also transition the CoWoS-S capacity to CoWos-L,” Huang said
Nvidia Corp CEO Jensen Huang (黃仁勳) is expected to miss the inauguration of US president-elect Donald Trump on Monday, bucking a trend among high-profile US technology leaders. Huang is visiting East Asia this week, as he typically does around the time of the Lunar New Year, a person familiar with the situation said. He has never previously attended a US presidential inauguration, said the person, who asked not to be identified, because the plans have not been announced. That makes Nvidia an exception among the most valuable technology companies, most of which are sending cofounders or CEOs to the event. That includes
INDUSTRY LEADER: TSMC aims to continue outperforming the industry’s growth and makes 2025 another strong growth year, chairman and CEO C.C. Wei says Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp and Apple Inc, yesterday said it aims to grow revenue by about 25 percent this year, driven by robust demand for artificial intelligence (AI) chips. That means TSMC would continue to outpace the foundry industry’s 10 percent annual growth this year based on the chipmaker’s estimate. The chipmaker expects revenue from AI-related chips to double this year, extending a three-fold increase last year. The growth would quicken over the next five years at a compound annual growth rate of 45 percent, fueled by strong demand for the high-performance computing
RSS