The nation’s financial account deficit accelerated for the 19th consecutive quarter to a record high of US$18.84 billion during the first quarter of this year, as local investors increased foreign currency-denominated assets in pursuit of higher returns, the central bank said yesterday.
However, the overall balance of payments (BOP) remained in the positive zone last quarter with a surplus of US$3.81 billion, as a record-high current account surplus of US$22 billion more than offset the net outflow from the financial account, due to cheaper imports.
The BOP, which includes the current, financial and capital accounts, captures the amount of money paid or received by the nation for trade goods and services.
The BOP surplus was US$2.62 billion a year earlier, when the current account surplus reached NT$15.06 billion, central bank data showed.
“A lack of investment tools and a series of deregulations drove more local funds to seek returns overseas,” central bank Economic Research Department Deputy Director Lin Shu-hua (林淑華) said.
Cumulatively, net fund outflows amounted to US$187.8 billion, enough to build 13 high-speed rail systems, central bank data showed.
Portfolio investment assets contributed a net outflow of US$14.22 billion last quarter as life insurance companies increased holdings in foreign-currency securities, Lin said.
The Financial Supervisory Commission lent support by allowing insurers to remove investment in Formosa bonds — yuan-denominated bonds sold in Taiwan — from the foreign investment ceiling, Lin said.
While Taiwan reported US$1.06 billion in foreign direct investment in the first quarter, it saw US$2.72 billion in overseas direct investment, Lin said, adding that a majority was bound for China.
“Fund outflows are commonplace for countries with current account surpluses as financial service providers need to digest money from exporters,” Lin said.
The situation might ease if financial institutions manage to design new and attractive investment products for customers and boost their fee incomes, Lin said.
Financial regulators have encouraged product innovation among financial services providers, but it might take time for the effort to bear fruit, Lin said.
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