Mega Bank Annual Report 2017

2 Mega Bank -2- Chairman Chao-Shun Chang 2. Financial Market Since there are still many uncertainties in the international economic outlook, the Central Bank will maintain the policy of an unchanged interest rate. Furthermore, since the domestic economic recovery was weak in the first half of 2017 and the capital demand by manufacturers is limited, the average overnight rate of the financial industry in the first half of the year was slightly lower. Economic recovery accelerated in the second half of the year, and the average interest rate rose slightly. However, the average of the entire year was 0.179%, which was still lower than 0.193%, the average in 2016. Looking ahead to the future, as the international economy recovers, domestic economic growth is expected to remain steady. However, since inflation is mild and in order to drive economic growth, it is expected that the Central Bank will still maintain a relaxed monetary policy. In terms of exchange rates, from January to May 2017 and influenced by the comments by US President Trump regarding a weak US dollar, the Federal Reserve Bank of the United States was not as hawkish as expected. Along with the impact of the large-scale inflow of foreign capital, the exchange rate between NT dollar and US dollar rose significantly. After the Federal Reserve Bank of the United States increased the interest rate by a quarter of a percentage and announced the plan to reduce the balance sheet by the end of the year in June, and after the geopolitical risks of North Korea heated up, foreign companies started to transfer funds outbound and thus NT dollar slightly depreciated from June to September. In the fourth quarter, foreign companies started to transfer funds inbound again. In addition, US dollar continued to be weak internationally; the exchange rate between NT dollar and US dollar appreciated to over 30 dollars at one point. At the end of the year, the exchange rate was 29.858 dollars to one US dollar. Overall, the average exchange rate in 2017 was 30.44 dollars, an appreciation of 6.18% compared with 32.32 dollars in 2016. In the first quarter of 2018, foreign capital inflow continued, along with a series of international news unfavorable to a strong US dollar. NT dollar continued to appreciate; as of the end of March, the closing exchange rate between NT dollar and US dollar rose to 29.12 dollars, maintaining the trend of appreciation.