Perng to Keep Taiwan Stable Amid China Links, Weaker Growth

Taiwan will appoint central bank governor Perng Fai-Nan to a fourth five-year term in a vote of confidence for his currency-stabilizing policies amid closer ties with China and as the export-dependent economy recovers.

Perng, 74, will stay on as governor of the Central Bank of the Republic of China (Taiwan) after his current term expires at the end of February, Fan-Chiang Tai-chi, a presidential office spokesman, said yesterday.

The re-appointment comes as President Ma Ying-jeou acts to strengthen an economy that grew in 2012 at the slowest pace since the 2009 global recession. Perng, who enjoys bipartisan support, has promoted order in the island’s currency market and overseen the start of offshore yuan business in Taiwan. Perng was appointed in February 1998 by President Lee Teng-hui after Governor Sheu Yuan-dong died in an airplane crash.

“Perng’s re-appointment is a big help in maintaining stability in Taiwan’s financial environment,” Tsung-Sheng Liu, president of Yuanta Securities Investment Trust Co., Taiwan’s biggest money manager, said by phone. “Now that the uncertainty is gone before the Lunar New Year holiday, we’re bullish about Taiwan stocks.”

Taiwan’s benchmark stock index, the Taiex, has risen 2 percent this year, compared with a 1.21 percent gain in the MSCI Emerging Markets index. Taiwan stocks have advanced 8.1 percent over the past six months.

Currency Concerns

The re-appointment may help allay concerns about greater fluctuations in the island’s currency. Policy makers warned on Jan. 29 they may step into the foreign-exchange market after the Taiwan dollar reached a four-year high against the yen on Jan. 28, hurting exporters.

The island’s currency has gained about 10 percent against its U.S. counterpart under Perng’s 15 years at the helm. This past week, Taiwan dollar weakened 1.4 percent to NT$29.668 against the greenback, according to Taipei Forex Inc. That’s the biggest five-day loss since September 2011.

Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co., the world’s biggest contract manufacturer of chips, said at a forum Jan. 11 that the government should let the Taiwan dollar depreciate further to aid competitiveness, according to a Formosa Television report.

Taiwan’s central bankers have held interest rates steady for six straight meetings since June 2011 as the export-dependent economy struggled with weakened demand for its electronic goods.

In the fourth quarter of 2012, gross domestic product rose 3.42 percent from a year earlier, compared with a 0.98 percent pace in the previous three-month period. Exports account for more than two-thirds of Taiwan’s economy and almost 30 percent of shipments go to China, government data shows.

Export Orders

Taiwan’s export orders, an indicator of shipments in the next one to three months, rose 8.5 percent from a year earlier in December, after an 11.1 percent gain reported for November, the Ministry of Economic Affairs said on Jan. 21.

Perng, who holds a doctorate in law from the University of Minnesota, helped guide Taiwan’s lenders through the aftermath of the 1997-1998 financial crisis in Asia, in part by cutting of reserve requirements for banks to deal with bad loans.

Next term, Perng’s needs to enact an agreement with the People’s Bank of China to allow offshore yuan clearing and trading on the island. Mainland China’s official Xinhua News Agency said on Jan. 31 that Taiwan lenders can start taking deposits and making loans in China’s currency as soon as Feb. 6.

In December, Perng told inquiring lawmakers that the governor’s position “will be my last public job.” He is the longest-serving central bank governor among Asian economies tracked by Bloomberg. Malaysia’s Zeti Akhtar Aziz, who took charge in May 2000, comes next.

Grade A

Perng, Zeti, Amando Tetangco of the Philippines, Glenn Stevens of Australia and Israel’s Stanley Fischer received “A” grades in Global Finance magazine’s annual ranking of the world’s central bankers last year. They were rated higher than Federal Reserve Chairman Ben Bernanke and the European Central Bank’s Mario Draghi.

Perng “has an incredible record of pre-empting crisis and reassuring the markets,” Wai Ho Leong, a Singapore-based economist at Barclays Plc, said before the announcement. “He’s done an excellent job of managing the growth-inflation trade-off and has maintained systemic stability. He’s also very well-regarded internationally.”

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