The nation’s net foreign fund outflow last month totaled US$10.389 billion, an all-time record, due to panic-selling by foreign institutional investors, the Financial Supervisory Commission said yesterday.
Foreign institutional investors dumped a net NT$361.99 billion (US$12 billion) of local shares, more than twice the NT$180 billion they sold during the first two months of the year, amid the COVID-19 pandemic, the commission said.
Under the central bank’s rules, foreign institutional investors gaining from their investment in local equities must decide within a week whether to transfer the money out of Taiwan or put it back into the local market.
Most foreign institutional investors last month moved their funds out of Taiwan, pushing up fund outflows to a record-high level, Securities and Futures Bureau Deputy Director-General Tsai Li-ling (蔡麗玲) told the Taipei Times by telephone.
“It is understandable that some foreign institutions and fund houses decided to increase cash holdings to meet redemption demand amid volatility in the global financial market,” Tsai said.
Some investors chose to park their New Taiwan dollars in the nation, which could explain why there was a difference of US$1.6 billion between the amount of fund outflows and the amount of shares sold, Tsai said.
Those investors might be planning to buy local stocks in the near term or waiting for the NT dollar to appreciate, which would earn them more money when converting the local currency to US dollars, she said.
The commission said that fund outflows are a dynamic movement of foreign funds, especially during major events such as during the 2008-2009 global financial crisis or the European debt crisis, which triggered foreign fund outflows of NT$7.52 billion in October 2008 and NT$8.02 billion in August 2011 respectively.
In the first three months, Taiwan saw a foreign net fund outflow of US$12.99 billion, the highest level for a first quarter, while Chinese institutional investors reported a much smaller net fund outflow of US$12 million during the period, the data showed.
Net foreign fund outflows would slow down this month, as foreign institutional investors have eased back on selling in the local equity market and the TAIEX yesterday climbed back above 10,000 points, Tsai said.
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