The nation’s capital momentum remains healthy, as an upward trend in annual money supply growth continued last month, boosting the New Taiwan dollar and local capital markets, Yuanta Securities Investment Consulting Co (元大投顧) said in a research note on Friday.
Yuanta’s forecast came as the central bank released the latest money supply data a day earlier, showing that M1B — a narrow measurement of money supply in circulation, including currency and passbook savings deposits — rose 14.3 percent last month from a year earlier, higher than the 12.85 percent growth posted in October.
It was the fifth consecutive month that M1B growth had increased by a double-digit percentage, with the 14.3 percent rise marking the highest increase since May 2010, central bank data showed.
The broader M2 monetary aggregate — which includes M1B, time deposits, foreign currency deposits and mutual funds — increased 7.6 percent year-on-year last month, compared with 7.05 percent growth posted the previous month.
Last month’s growth was the highest increase since September 2009, the data showed.
The central bank attributed the M1B and M2 growth to net capital inflows, faster growth in bank loans and investments.
The strong annual increase in M1B last month came as “outstanding securities transfer deposits climbed to a record high of NT$2.63 trillion [US$92.15 billion], which accelerated the growth in passbook savings deposits and indicated sufficient funds that people have at hand,” Yuanta economist Yen Chen-hui (顏承暉) said in the note.
The change in outstanding securities transfer deposits reflects individual investors’ sentiment. When deposits increase, it indicates that investors have a greater intention to buy stocks and the TAIEX might rise.
The TAIEX last month rose 1,176 points, or 9.38 percent, Taiwan Stock Exchange data showed.
“The high growth rate of M2 last month was mainly due to net capital inflow, net purchase of local securities by foreign investors and faster growth in NT dollar deposits by foreigners, as well as growth in lending and investments,” Yen said.
As Taiwan’s COVID-19 situation is relatively stable, the economy is growing and consumer prices have increased slightly, Yen said.
Coupled with the abundant market capital momentum, the central bank might keep its policy rates unchanged in the near term, which would support the strength of NT dollar exchange rate, he added.
The aggregate money supply is also expected to maintain growth on the back of healthy economic fundamentals and continued capital inflows, he said.
For the first 11 months of this year, the average annual growth rate of M1B was 9.79 percent and that of M2 was 5.6 percent, which stayed at the high end of the central bank’s target zone of 2.5 to 6.5 percent, central bank data showed.
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