The nation’s money supply increased year-on-year last month, but the narrow monetary gauge grew faster than the broader indicator, the central bank said yesterday, raising concerns over the pace of liquidity-driven rallies on the local bourse.
The M1B reading, which includes cash and cash equivalents, increased 6.9 percent last month from a year earlier, decelerating from 6.95 percent in November last year, the bank said.
The increase is the slowest in 20 months and marks the fifth straight month of deceleration, as funds continued to be pulled out of Taiwan in favor of foreign currency-based assets, the bank said.
The strategy helped explain why the New Taiwan dollar weakened 0.22 percent last month, it said.
The trend has shown a modest turnaround this month, with the NT dollar closing at NT$31.339 against its US counterpart in Taipei trading yesterday, thanks to hot money inflows caused by Europe’s planned quantitative easing measures.
Foreign institutional players increased local shares by another net NT$9.03 billion (US$288.1 million) yesterday, helping lift the TAIEX by 0.07 percent, Taiwan Stock Exchange data showed.
M2 — which includes savings deposits, time-savings deposits, foreign currency deposits, mutual funds and the narrower M1B — rose by 5.85 percent last month from the year-ago level, accelerating from 5.22 percent in November, the central bank said.
The so-called “death cross” — where M2 grows faster than M1B and suggests a bear market — might be observed this or next month if the money supply movements persist, analysts said.
The central bank attributed M2 growth to more active lending and investments among domestic banks.
For the whole of last year, M1B increased by 7.96 percent and M2 by 5.66 percent.
The latter fell within the growth target of between 2.5 percent and 6.5 percent that the central bank set for last year to support a modest economic expansion.
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