The US remained Taiwan’s largest debtor nation in the first quarter of the year, although domestic banks’ exposure to the world’s largest economy decreased, as the COVID-19 pandemic drove local investors to redeem foreign funds, the central bank said on Wednesday.
Taiwanese banks’ direct risk exposure to the US stood at US$84.36 billion, while ultimate risk exposure — after factoring in risk transfers — was US$83.89 billion, down from record highs of US$89.75 billion and US$86.36 billion respectively three months earlier, the central bank said in a report.
Despite the retreat, the US topped other debtor destinations for the 19th consecutive quarter, as earlier interest rate hikes by the US Federal Reserve attracted global funds to US investment instruments, the report said.
However, wild swings last quarter across global financial markets prompted Taiwanese investors to terminate their investments in US dollar-based mutual funds, it said.
The markets remain volatile as funds continue to seek safe havens following aggressive rate cuts by central banks worldwide to pre-empt credit crunches, while COVID-19 infections continue to spike in the US, several European nations, Russia and Brazil as well as some Asian and Middle Eastern nations.
China came in second, with Taiwanese banks’ exposure totaling US$46.1 billion on a direct-risk basis and US$66.9 billion on an ultimate-risk basis, the report said.
Yuan-denominated investment tools have lost their appeal amid a spate of rate cuts and depreciation of the Chinese currency, it said.
Hong Kong placed third, with an increase in direct-risk exposure to US$37.04 billion and ultimate-risk exposure to US$25.25 billion after local banks wired money to their Hong Kong branches to cope with earlier liquidity tightness, the report said.
Overall, Taiwan’s direct-risk exposure fell 3.4 percent to US$438.5 billion, while ultimate-risk exposure decreased by 2.97 percent to US$423.2 billion, the report showed.
Advanced economies accounted for 51.05 percent of the total, followed by developing markets at 25.85 percent, it showed.
Asian and Pacific nations made up 48 percent, while American and Caribbean regions accounted for 29.85 percent, it added.
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