Thu, Jan 10, 2019 - Page 12 News List

Taiwan could see more fund outflows: brokerage

By Kao Shih-ching  /  Staff reporter

Taiwan could experience more fund outflows this year, as global index provider MSCI Inc is to raise the weighting of China’s A-shares, which would be unfavorable for the local bourse, Capital Futures Corp (群益期貨) said yesterday.

The nation’s net foreign fund outflows amounted to US$10.34 billion for the whole of last year, second only to outflows of US$12.84 billion recorded in 2008 during the global financial crisis, Financial Supervisory Commission (FSC) data showed.

Foreign institutional investors sold a net NT$354.25 billion (US$11.5 billion) of local shares on the main board and a net NT$13.25 billion on the Taipei Exchange market, FSC data showed.

A considerable amount of foreign capital flew into Chinese equities after the much-tracked MSCI included A-shares in its emerging markets index and increased the weighting, Capital Futures executive vice president Rico Fan (范振鴻) said.

Net foreign fund inflows to China reached US$43 billion for the whole of last year, triple that of MSCI’s forecast, as foreign funds showed a keen interest in Chinese shares, Fan said.

Exchange Traded Funds, which track the MSCI indices, bought A-shares to stay in line with the index’s performance, contributing to capital flight, he said.

Although foreign investors were stuck with the stock market after A-shares took a plunge last year, net foreign fund inflows to China might rise to US$80 billion this year, as MSCI is to lift the weighting from 0.7 percent to 2.8 percent by August, Fan said, adding that the asset allocation trend could affect local shares.

However, the local firm expects the US-China trade dispute to ease later this year, as Washington has sounded more dovish lately, a change that could lend support to share rebounds in China and the US, Fan said.

The local bourse would remain volatile this year, as technology cycle corrections weigh on domestic technology firms, Capital Futures president Mark Lee (李文柱) said.

Taiwan is home to the world’s major contract chipmakers and manufacturers of other critical components used in smartphones and other consumer electronics.

Investors should closely watch trade negotiations and policy moves by the US Federal Reserve, Lee said.

Capital Futures reported a record NT$950 million in pre-tax profits last year, an increase of 15 percent from a year earlier, Lee said, adding that the firm would expand its overseas operations this year.

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