Yang Chin-long on Taiwan Stocks: Tech Sector is Profitable, Economic Fundamentals are Solid

(CNA, reporter Pan Tzu-yu, Taipei, June 18) The strong rise of the Taiwan stock market has triggered a nationwide investment craze, raising concerns about escalating financial risks. Central Bank Governor Yang Chin-long stated today that the stock market is a window to the economy, people are very interested in artificial intelligence (AI) themes, and the tech sector is indeed profitable, with solid economic fundamentals. However, risks of credit expansion still need to be monitored.

The Central Bank held its second quarterly meeting today, deciding to keep interest rates unchanged for the ninth consecutive time, in line with market expectations. Notably, the Central Bank pointed out that with the heated stock market, people are increasing their borrowing for wealth management activities, and banks need to pay attention to related credit expansion and risk control.

As the Taiwan stock market repeatedly reaches new highs, recent market discussions mention people entering the market through a "four-loan-at-home" approach, using home loans, car loans, personal loans, and stock financing. Yang Chin-long stated that legislators are paying close attention to this issue, but his view has not changed: "We are still far from systemic risk."

Yang Chin-long cited the "dog-walking theory," suggesting that while stock prices may deviate from fundamentals in the short term, they will eventually return to corporate profits and economic fundamentals in the long run. If the economy is poor but the stock market is booming, close attention must be paid. However, the Central Bank has revised Taiwan's economic growth rate for this year up to 9.45%, indicating truly brilliant economic performance. The booming stock market is also due to the market's strong interest in AI themes and the tech sector's profitability.

Regarding "four-loan-at-home" becoming a common market term, Yang Chin-long said he finds it a bit exaggerated. "Our economic fundamentals are good, which is why the stock market is doing well. As for whether it is overheated, the competent authority, the Financial Supervisory Commission, will monitor it closely."

Yang Chin-long also responded to his earlier statement during legislative questioning when asked about banks borrowing funds from TSMC, where he expressed being "a bit puzzled." He explained that at the time, he had limited time to think carefully, hence his puzzlement. After detailed understanding, he is "no longer puzzled at all."

Yang Chin-long elaborated that recently, due to a large inflow of tax payments into the Ministry of Finance's accounts, coupled with the heated stock market and increased funding needs from securities firms, market liquidity has been relatively tight. Banks seeking new Taiwan dollar deposits from large enterprises like TSMC to meet short-term funding needs is a normal capital management activity.

Yang Chin-long further pointed out that large enterprises like TSMC hold substantial funds. Banks absorbing short-term deposits through special projects is closer to the capital transaction model of large enterprises, rather than a general retail concept. Moreover, after absorbing short-term corporate funds, banks can still earn interest margins through lending, so there would be no situation of them losing money. "Banks wouldn't be that foolish." (foolish)." (Editor: Yang Kai-hsiang) 1150618

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