Investment in foreign equities by Taiwanese investors could top NT$100 billion this year, but analysts warned that too much money was being concentrated in Japan and heavy losses could result if the market were to collapse again.
According to local commercial banks, total offshore fund sales reached an estimated NT$65.6 billion in the first 11 months of this year.
When the figure is added with estimates of sales derived from local securities investment advisors, the total for offshore fund buying could exceed NT$100 billion (US$3.16 billion) this year, a new milestone.
Meanwhile, the total size of foreign equity funds managed by all domestic securities investment companies increased NT$19.93 billion in the first eleven months of this year to NT$61 billion, a 48 percent jump over last year, according to the Association of Securities Investment Trust and Advisory (
When it comes to attracting cash, foreign equity funds have been more popular than those devoted to local stocks. According to the association, domestic open-ended funds managed by local firms increased by just 32 percent this year, or NT$53 billion, to reach NT$219 billion.
Industry analysts said the main reason for the tremendous interest in foreign equity funds has been Japan's economic recovery and the brighter prospects among other Asian equity markets.
A number of funds have generated amazing rates of return this year. For example, Jardine Fleming Oriental Technology Fund has gained 138 percent; Kwang Hua Japan Fund, 123 percent; and Jardine Fleming Emerging Japan Fund, 122 percent.
According to S&P Micropal, the average rate of return of all offshore Japanese funds was 142 percent. Some of the high-fliers have been Jardine Fleming OTC Trust Fund, which has soared 547 percent this year, and GT Japan Smaller Companies Fund, which has climbed 383 percent.
With these sky-high rates of return, there is little wonder why off- shore and foreign equity funds -- especially those focused on Japanese stocks -- have drawn so much attention.
"We have a good sales record so far this year; it could be one of the best in the last ten years," said Sue Huang (黃2Q君), vice president of Franklin Templeton Securities Investment Consulting (富蘭克林投顧).
Like other foreign fund companies, Franklin Templeton declined to reveal its exact sales figures. Presently, the company doesn't offer a Japanese fund.
"Although Japanese equity funds have been hot sellers this year, concentration in a certain equity market could also bring with it significant risk," said Henry Cheng (鄭|吜?, managing director of Manulife FundDirect (宏利免|
"In 1990, the Nikkei 225 Index dropped from 38,900 points, its historical peak, to less than half that in less than a year. At the time, thousands of Taiwan investors suffered severe losses," Cheng said.
"But it seems that they did not get the lesson," he continued. "We suggest ordinary investors should diversify their investment to a broader scope, such as regional or global equity fund, in order to lower the risk of being invested in a single country."
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