The nation’s monetary aggregates climbed modestly last month from the previous month as investors continued to redeem overseas securities and wired capital home amid the ongoing financial market downturn, the central bank said yesterday.
However, the increasing money supply failed to translate into more private investments and reflected a sharp increase in time and savings deposits, with domestic equity markets proving equally bleak recently.
“The M2 money supply indicator gained 1.45 percent, or NT$386.3 billion [US$1.16 billion], to NT$27 trillion per day last month,” said Lin Tzong-yau (林宗耀), deputy director-general at the central bank’s Department of Economic Research. “The figure marked a 4.09 percent growth year-on-year and stood at 4.03 percent after seasonal adjustment.”
The broadest money supply measure includes time deposits, time savings deposits, foreign currency deposits and mutual funds as well as M1Bs.
The M1B, another monetary gauge that refers only to currency held by the public and demand deposits, also improved last month and advanced 0.4 percent, or NT$32.1 billion, compared with September.
The narrower measurement shed NT$338.2 billion, or 4.08 percent, from a year ago, but the decline hit 4.89 percent in September and 5.32 percent in August.
Lin attributed the modest improvement chiefly to net capital inflow on the part of domestic customers who appear to have adopted a conservative attitude toward investment products at home and abroad.
As of the end of last month, accumulated time and savings deposits rose 10.41 percent to 12.32 trillion from last year, central bank data showed.
The increase was the second-largest since October 1998 when the monetary gauge surged 12.85 percent.
By contrast, demand deposits fell 5.98 percent to NT$7.14 trillion, the statistics showed.
“The trend confirms the belief that cash is king,” Lin said. “It is quite easy to terminate time and savings deposit contracts.”
Export-Import Bank of the Republic of China (中國輸出入銀行) chairman Lii Sheng-yann (李勝彥) said the domestic and foreign equity markets would remain volatile for at least another six months and that investors would avoid high-leverage financial operations before the dust settles.
“A good indicator of stability is that major central banks across the world quit drastic intervention measures such as cutting interest rates,” Lee said on the sidelines of a seminar on the global financial crisis.
Lee said he would not be surprised if the US and European monetary regulators lowered their interest rates to zero as Japan did a few years back to reinvigorate the financial markets. But Lee voiced skepticism that Taiwan would apply the same strategy, adding that the central bank could adjust downward key rates again once key foreign counterparts take this step.
For the first 10 months of the year, the M2 supply grew 2.06 percent from last year while M1B dropped 2.95 percent.
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