Tue, Dec 27, 2011 - Page 12 News List

Annual growth in M1B, M2 threatens capital shortage

By Amy Su  /  Staff Reporter

The annual growth in M1B and M2 money supply fell last month amid a continuous net outflow of foreign capital and slowing growth in bank loans, forming a “black cross,” which could indicate a temporary shortage of capital, for the second month in a row, the latest central bank data showed yesterday.

M1B, a narrow measure of money in circulation, rose 4.22 percent from a year ago, down from its 5.12 percent increase in October, the lowest level since February 2009, the bank said.

The broader M2 monetary measurement — which includes M1B, time deposits, savings deposits, foreign currency deposits and mutual funds — increased 5.07 percent year-on-year last month, down from 5.54 percent in -October, data showed.

“The slow sentiment on the TAIEX last month dragged down the growth rates for both monetary aggregates, especially for M1B,” Chen E-dawn (陳一端), deputy head of the bank’s economic research department, told a press conference.

NET OUTFLOW

The net outflow of foreign capital totaled US$1.772 billion last month, with foreign-held New Taiwan dollar deposits also falling NT$8.1 billion (US$267.26 million) to NT$246.7 billion from a month earlier, Chen said.

However, liquidity remains sufficient, as investors can shift funds between time deposits and passbook deposits once stock market sentiment improves, Chen said.

In the first 11 months of the year, M1B and M2 rose 7.5 percent and 5.86 percent respectively, according to the bank’s data.

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