TAIPEI: Taiwan's financial watchdog announced capital controls yesterday by stopping overseas investors from putting Taiwan dollars into time deposits to curb what the authority calls currency speculation.

The Financial Supervisory Commission announced the immediate ban after the central bank said in October that foreign investors have parked about NT$500 billion ($15.5 billion) in Taiwan dollar accounts.

"If foreign fund holders want to invest in Taiwan, they should. Otherwise they shouldn't be here," said Lu Ting-chieh, chief secretary of the Financial Supervisory Commission.

A central bank spokesman declined to comment.

The ban reflects concern among policymakers in some emerging markets that the inflow of hot money could create asset price bubbles and boost their currencies to uncompetitive levels.

Last month, Brazil announced a 2 percent tax on foreign investment in stocks and fixed-income securities in order to contain the rapid strengthening of the real.

Foreign investors have bought Taiwan dollars in recent months, betting that the currency will strengthen further.

"This is very clearly a move to stop speculation in the Taiwan dollar," said Ma Tieying, an economist at DBS in Singapore.

"There are a lot of foreign funds that are betting on emerging markets such as Taiwan, and with the central bank trying to keep the currency weak, this seems like a first step it's taking," Ma said.

Reuters

(HK Edition 11/11/2009 page2)