The annual growth of M1B money supply fell below that of M2 money supply last month, forming a “black cross” which may lead to a temporary shortage of capital, the latest central bank data showed.
The M1B — a narrow measure of money in circulation — rose 5.12 percent last month from a year ago, compared with September’s 6.28 percent increase, the nation’s central bank reported yesterday.
The annual growth of the broader M2 money supply — which includes M1B, time deposits, time savings deposits, foreign currency deposits and mutual funds — contracted 5.54 percent last month, down from the 5.85 percent recorded in September, the bank said.
Chen E-dawn (陳一端), deputy chief of the bank’s economic research department, attributed the decelerating annual growth of both M1B and M2 to slowing growth in bank loans and investments.
While the downtrend of M1B and M2 has generated the “black cross,” also known as the death cross, and raised concerns about liquidity, Chen said slowing M1B annual growth had factored in the recent market volatility as investors shifted massive amounts of funds to time deposits to avoid losses from investments in the stock market.
“The liquidity remains sufficient as investors shift funds between time deposits and passbook deposits” in search of better returns and lower risks, Chen told a press conference yesterday.
She said Taiwan’s stock market has strong fundamentals, but uncertainties about the eurozone debt crisis have continued to hit investor confidence.
Although foreign-held New Taiwan dollar deposits dropped NT$13.6 billion (US$446.49 million) to NT$254.8 billion last month, foreign investors bought a net total of NT$51.3 billion in shares on the local bourse, with the overall amount of their inflow standing at US$421 million, evidence that market liquidity was still abundant, she added.
The black cross last happened in December 2007 and it lasted for 16 months, according to the central bank’s data.
The TAIEX, which closed at 8,586.4 at the end of November 2007, tumbled 1,065.27 points, or 12.4 percent, in the next two months, data showed.
In the first 10 months of this year, the M1B and the M2 expanded by an average annual rate of 7.94 percent and 5.94 percent respectively, data showed.
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