Taiwan's Finance Minister Christina Liu
Maurice Tsai/Bloomberg
Christina Liu, Taiwan's finance minister.
Christina Liu, Taiwan's finance minister. Photographer: Maurice Tsai/Bloomberg
Taiwan’s Finance Minister Christina Liu resigned after disagreeing with legislators from the ruling party over a proposed capital gains tax, dealing a blow to President Ma Ying-jeou.
The Kuomintang party caucus yesterday put forward a proposal for a levy on share trades that links tax rates to the benchmark Taiex stock index, watering down an earlier plan from the ministry that sought a flat rate to force wealthier investors to pay more.
“Under the KMT version, investors reaping massive profits from stock trades won’t need to pay a gains tax, which differs greatly from the ministry’s proposal,” Liu said in a statement on the ministry’s website today. “I am resigning, as I can’t accept the thinking behind the proposal.”
Liu was appointed Finance Minister in January after Ma won re-election. The resignation of the island’s former economic planning head nine days into Ma’s second term may signal a policy gap between the president and ruling party legislators.
“This resignation shows that the president and the Cabinet haven’t solidified their power within the legislature,” said Bruce Jacobs, a professor of Asian languages and studies at Monash University in Melbourne. “If you want to have a successful government you need to have your legislature onside, which means Ma could be in trouble over the next few years.”
Tax Choice
The resignation needs the acceptance of Premier Sean Chen, who heads the Cabinet. Chen, who oversaw the island’s markets during the 2008 economic crisis, and announced Liu’s appointment in January, has yet to meet with her, and plans to do so to discuss the tax, Hu Yu-wei, a Cabinet spokesman, said in a press conference today.
KMT legislators propose allowing stock investors to choose between a securities transaction tax with a progressive rate tied to the benchmark index, and one that imposes a levy on the gains as part of personal income tax calculation, according to a draft copy of the plan.
The market-linked proposal applies when the Taiex climbs above 8,500 points, with the rate rising every 1,000 points and topping out above 10,500 points.
The Taiex index closed 2.9 percent higher today, the biggest advance since Dec. 21, 2011.
“Investors are obviously much happier with this proposal, compared with the previous capital gains tax plan,” said Robyn Hsu, who helps oversee about $6.7 billion as a fund manager at Capital Investment Trust in Taipei.
Wealth Gap
Ma was sworn in for a second four-year term on May 20 after winning on a pledge to help tackle a wealth gap which the opposition said widened during his first term. He has built closer ties with China to boost cross-strait trade even as a faltering global recovery has hurt the export-dependent economy.
Taiwan last week cut its growth forecast for 2012 and said gross domestic product rose 0.39 percent in the three months through March from a year, the weakest pace since 2009.
The appointments of Chen and Liu were part of a leadership transition after Ma’s re-election. Liu was chief economist at Chinatrust Financial Holding Co. before she became minister of the Council for Economic Planning and Development. She was a member of the Cabinet tax reform committee between 2008 and 2009.
The resignation comes after approval for Ma fell to 20 percent this month, the lowest since August 2009, a TVBS Poll Center survey showed on May 17.
“The Finance Minister’s latest move won’t affect our plan for the legislature’s latest tax draft,” Lin Hung-chih, executive director of the KMT policy committee, said by phone today. “We will still seek to have the legislature’s Finance Committee discuss the proposal at a meeting on June 4.”
To contact the reporters on this story: Adela Lin in Taipei at alin95@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net.
To contact the editors responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net Stephanie Phang at sphang@bloomberg.net.
Forex: USD/CAD near session highs above 1.0250 - FXStreet.com
Forex Signals - EURUSD Still Falling - Int'l Business Times
Recap: We didn't enter any new trades before the weekend (as promised), or yesterday since the US Banks were closed for Memorial Day. The markets did open with a bullish gap, however, which has already been closed and the pair is within 20 pips of it's Friday closing price.
Finance Ministry, Bank Indonesia Not Dismayed by Recent Economic Slump - thejakartaglobe.com
The Finance Ministry and Bank Indonesia are optimistic that the recent slump in the financial markets will be just temporary, given that the country’s economy is in solid condition.
Investors scared off by events in Indonesia and abroad on Friday led the country’s benchmark stock index to its biggest single-day fall in almost seven months.
The rupiah also weakened overseas as investors reduced their holdings in Indonesian assets amid concern that the government’s regulatory framework would deter foreign investment. There were also fears that Greece’s withdrawal from the euro zone would siphon money from emerging markets.
Finance Minister Agus Martowardojo said he was optimistic that the nation’s economic growth was to remain strong, referring to the recent report issued by the Organization for Economic Cooperation and Development.
He said robust investment and a pick up in investment would be the key drivers in the domestic economy.
The Paris-based organization said in a report on May 22 that Indonesia’s economy “has continued to grow at a rapid pace, despite signs of slowing elsewhere in Asia and its impact on regional trade.”
The OECD predicted Indonesia’s economy will expand 5.8 percent this year and 6 percent next.
Hartadi Sarwono, a deputy governor at the central bank, acknowledged there had been a reallocation of assets from emerging market assets into safe-haven assets.
He also denied talk that Bank Indonesia would impose tight controls in foreign exchange, replacing the nation’s current free-floating foreign exchange system, which ensures the free movement of capital in and out of the country.
Investor Daily
FOREX-Euro edges up but Spain fears leave it vulnerable - Reuters UK
* Euro stays near last week's low just below $1.25
* Doubts grow that Spain can support ailing banks on its own
* Eyes on whether Spanish govt bond yield hits 7 pct
* EUR short covering may be curbed ahead of Irish referendum
LONDON, May 29 (Reuters) - The euro edged up against the dollar on Tuesday as investors cut hefty bearish bets in the currency, but worries about Spain's banking sector left it hovering close to its lowest levels in nearly two years.
Analysts and traders said the euro had good support at the $1.2500 level and Friday's trough of $1.2495, with bids around that area, but expected it would soon break lower given the extent of the concerns surrounding the euro zone debt crisis.
Worries about the cost of shoring up Spain's banking system lifted its debt yields on Monday, driving the gap between Spanish and German 10-year yields to euro era highs, as the risk grew that Spain may be forced to seek an international bailout.
The euro was up 0.2 percent at $1.2566, with traders citing demand from corporates and Middle East names.
Having failed to clear resistance at previous support around $1.2625 for three days in a row, however, the euro was vulnerable to another test of Friday's low, which marked its weakest since July 2010.
"We may see a bit of consolidation here but going forward we still have a euro that is very weak and vulnerable. The widening of spreads between Spain and Germany and Italy and Germany keeps worries about the debt crisis very much alive," said Niels Christensen, currency strategist at Nordea in Copenhagen.
"I don't see the euro moving above $1.27. It's only a matter of time before it breaks $1.25. This is psychological support but it's not a big level like the January low was (around $1.2624) and that has clearly broken."
The euro gave up most of the gains made on Monday after Greek polls showed more support for pro-bailout parties ahead of the country's election on June 17. That eased fears Greece may leave the euro zone.
Bids just below $1.25 may support the euro for now, though further losses could see it drop towards $1.2450, where traders reported stop-loss sell orders.
"Although pessimism over Greece is somewhat receding, worries about Spain are growing, with markets watching whether the Spanish bond yield will hit the seven percent mark," said Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo.
Short-term, the euro may continue to be held up by bouts of short covering. Speculators bolstered short euro positions to record highs in the week ended May 22, leaving ample scope for a correction as they cut positions and book profits.
TROUBLES IN SPAIN
Many traders expect further downside in the euro as they fear troubles at Spanish banks hit by a bust in property could further complicate Madrid's efforts to rein in its debt.
Spain's fourth-largest lender Bankia has asked for a bailout of 19 billion euros, in addition to 4.5 billion euros the state has already pumped in to cover possible losses on repossessed property, loans and investments.
Prime Minister Mariano Rajoy on Monday again ruled out seeking outside aid to revive Spain's banking sector, though many investors are sceptical this will be possible.
Spanish 10-year bond yields rose above 6.5 percent on Monday. A level of 7 percent is seen as critical as euro zone countries that have previously requested bailouts did so soon after their 10-year yields rose above that mark.
Any buying in the euro may also be curbed ahead of Ireland's referendum on Europe's new fiscal treaty on Thursday, although the market is cautiously optimistic that the Irish will support the treaty on fear that a "no" vote could add fuel to the fire.
Against the yen, the common currency fetched 99.87 yen , not far from a four-month low of 99.37 yen hit last week. The yen, along with the dollar, was supported by the market's risk averse mood.
The dollar stood at 79.47 yen, not far from a three-month low of 79.002 yen.
The higher-yielding Australian dollar was up 0.4 percent at $0.9888, above last week's six-month low of $0.9690.
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