The nation’s money supply increased year-on-year last month, but the broad monetary gauge grew faster than the narrow indicator, the central bank said yesterday, dismissing concerns over a liquidity slowdown.
The so-called monetary supply “death cross” — where M2 grows faster than M1B and suggests a bear market — manifested last month, as the M1B reading — which includes cash and cash equivalents — increased 5.03 percent last month from the same period last year, slowing from 6.9 percent in December last year, the central bank said.
“There is no need to worry about liquidity flows, as foreign investors have been increasing their holdings in local shares,” the central bank added, citing data from the Taiwan Stock Exchange.
The TAIEX rallied above the 9,000-point mark for three consecutive months and last month saw net foreign fund inflows standing at NT$92.39 billion (US$2.93 billion), much higher than US$800 million a year earlier, the bank said.
M2 — which includes savings deposits, time-savings deposits, foreign currency deposits, mutual funds and the narrower M1B — advanced by 5.86 percent year-on-year, mostly because of inflows of foreign funds, the bank added.
The increase in M1B is the slowest in two years and marks the sixth straight month of deceleration, the bank said.
The bank dismissed concerns over a liquidity crunch and attributed the movements to holiday disruptions.
Part of the Lunar New Year holiday fell in January last year, pushing up cash demand and the comparison bar for this month, the bank said.
M1B, which is widely tracked by stock analysts to predict investor willingness to channel money to risky assets, should stage a faster increase this month after the holiday distortions, the bank said.
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