Financial Regulatory Forum

(This article was in IFR Asia magazine, a Thomson Reuters publication, on Oct 16)

By Prakash Chakravarti and Umesh Desai

HONG KONG – Thailand’s move last week to reintroduce withholding tax on government bond holdings comes as policymakers across the region take steps to restrain capital inflows after a sustained rally in Asian currencies. However, there are doubts if these measures will do enough to deter investors in search of yield, and market participants are calling for tax cuts – not hikes.

In what many analysts believe is likely to be an ineffective attempt to arrest an appreciation of the baht, Thailand’s Ministry of Finance last week announced the reintroduction of a 15 percent withholding tax on foreign investments in government debt.

The move appeared to in response to the baht’s 11 percent rise year to date – to its strongest level against the US dollar since the 1997 Asian financial crisis – due largely to supposedly speculative inflows.

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By Neil Chatterjee and Aditya Suharmoko

JAKARTA, Oct 5 (Reuters) – It’s taken a year, but Indonesia’s central bank has finally won over markets into accepting its dovish policy outlook. Still, it doesn’t feel like a success.

Instead, the policy that is designed to reduce the allure of Indonesian assets to yield-hungry investors is attracting capital into the country’s debt markets and increasing the risk that authorities will take steps to control the tide. (more…)

By Sven Egenter

ZURICH, Jan 26 (Reuters) – Private capital inflows to emerging markets are set to soar by two thirds this year as countries like Brazil and China drive global recovery and fuel “hot money” risks, the Institute of International Finance (IIF) said on Tuesday.

Emerging markets seemed to be aware of risks from short-term, yield-chasing cash inflows, the global banking association said. Mature economies need to come up with credible plans to tackle spiralling debt and liquidity, it said.

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TAIPEI, Jan 4 (Reuters) – Taiwan’s central bank said on Monday that overall foreign fund inflows had exceeded the amount for purchases of local stocks in the past two sessions, and it had passed the names of the foreign investors who have excessive deposits in Taiwan dollars to financial regulators.

The central bank made the comment in a brief statement after the Taiwan dollar strengthened to a near 16-month closing high against the U.S. dollar on Monday. It did not identify the foreign investors.

The Taiwan dollar rose to an intraday high of T$31.731 but dealers said last-minute intervention by the central bank trimmed some of early gains to close at T$31.898 on Monday, still stronger than the T$32.030 close in in the previous session.

   By Susan Fenton
HONG KONG, Nov 20 (Reuters) – Hong Kong’s central bank chief Norman Chan warned that asset prices in the city could climb sharply next year and disconnect from fundamentals, raising the risk of a bubble, and said surging capital inflows posed a dilemma for policymakers across Asia.

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Russia eyes “soft” measures against capital inflow
MOSCOW, Nov 18 (Reuters) – Russia is discussing possible “soft” measures to limit speculative capital inflows and may adjust the parameters of its currency market intervention policy, central bank chairman Sergei Ignatyev said on Wednesday.
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