The Central Bank of China Has Included 20 U.S.and European Investors

response to the influx of hot money into Asia following the rollout of the third-round quantitative easing policy(QE3)of the U.S.,the Central Bank of China(CBC)has included 20 U.S.and European investors with frequent funding movement into a black list for close monitoring.Citing a proposal of the International Monetary Fund(IMF),Perng Fai-nan,CBC governor,expressed that a nation can embrace capital control measure to cope with capital inflow.

Perng remarked that"The CBC is watching closely the movement of hot money and will adopt countermeasures to stabilize the forex market,when necessary."Perng noted that QE3 has driven down bond interest rate,bolstered stock prices,and induced depreciation of the U.S.dollar,thereby enlivening the housing market,increasing consumption and investment,and augmenting export competitiveness.It,however,has loosened fund supply and prompted foreign funds to flow to emerging markets,thereby disrupting the financial stability of various nations.

In written materials prepared for his report at the Legislative Yuan today(Sept.26),Perng pointed out that the CBC's monetary policy embraces the two major principles of"dynamic stability"and"adherence to the change of the Korean won."In other words,the CBC has been endeavoring to keep the fluctuation of the NT dollar less than that of other major currencies,such as euro,and stick to the movement of the Korean won,in order to bolster the competitiveness of Taiwan's export industry.

In monitoring hot money,the CBC discovered that of 6,000 foreign investors for the stock market last year,20 boasted frequent inward/outward remittances and accounted for 35%of the remittances of foreign funds.In addition,remittances of foreign funds accounted for over 30%of forex transactions of domestic banks.

Following the rollout of QE2 in the U.S.,CBC discovered that of 6,000 foreign investors,29 accounted for 30%of remittances of foreign funds.In the wake of the QE3 policy,the number of speculative foreign investors is fewer but the amount of speculative funds is higher.

Most speculative foreign investors dump massive amount of funds on the forex market via the U.S.and European custodian banks.Some foreign investors even have the background of sovereign funds or hedge funds.