Sat, Dec 25, 2010 - Page 12 News List

Monetary supply increases 5.2% on loans, fund inflows

By Crystal Hsu  /  Staff reporter

The nation’s monetary supply picked up last month from a year earlier on growing bank loans, investments and net fund inflows, the central bank said yesterday, indicating increasingly vibrant financial activity.

M2, the broad monetary gauge, rose 5.2 percent last month from a year earlier as banks increased corporate lending, Chen E-dawn (陳一端), deputy chief of the central bank’s economic research department, told a press briefing.

Total outstanding loans and investments of major financial institutions rose 6.33 percent year-on-year last month to NT$22.54 trillion (US$739.4 billion), the report showed.

US$1.4 billion in net foreign fund inflows also helped lift the M2 gauge, Chen said, as global capital continued to flood into Asian markets, attracted by the region’s fast-growing economies.

The narrower M1B reading, which includes cash and cash equivalents, expanded 9.18 percent last month from a year earlier, but slowed for the 11th month to single-digit growth, the report said.

Chen attributed the slowdown to foreign investors removing local currency deposits. Deposits dropped NT$34.1 billion to NT$221.7 billion at the end of last month, Chen said.

She dismissed worries that a smaller M1B expansion suggested a lack of growth dynamism in the local bourse, saying there remains ample liquidity with M1B totaling NT$11.1 trillion as of the end of last month.

Money managers agreed.

Doris Lee (李穗佳), a fund manager at Taishin Securities Investment Trust Co (台新投信), said the TAIEX was likely to see modest gains next week in the absence of bad news at home and abroad.

The main index shed 37.77 points to 8,861.1 at close of trade yesterday, but stayed above the five-day moving average, indicating lingering bullish sentiment, Lee said in a note.

“It is better to leave shareholdings intact on the improving earnings ability of major firms,” Lee said.

Sunny Chung (鍾兆陽), market intelligence manager at Allianz Global Investors Taiwan Ltd (德盛安聯投信), said the TAIEX was likely to climb higher next week as foreign investors may continue to increase their stakes in the market after net purchases of about NT$10 billion in local shares in the past week.

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