Domestic mutual funds last year grew 12.95 percent to a record NT$4.52 trillion (US$158.76 billion) as currency, equities and exchange-traded funds (ETFs) gained popularity among local investors, state-run First Securities Investment Trust Co (FSITC, 第一金投信) said yesterday.
The increase of NT$518.6 billion is the third-largest in history, FSITC said, attributing the rapid growth to major global central banks printing money to boost their economies and ease the effects of the COVID-19 pandemic.
Low interest rates also helped drive money to risky assets, as investors are seeking better returns and time deposits no longer serve that purpose in many parts of the world, it said.
Domestic currency funds grew NT$227.3 billion from the end of 2019, followed by increases of NT$134.2 billion and NT$80.8 billion in domestic ETF and equity funds respectively, FSITC said.
Meanwhile, international bond funds, multiple asset funds and equity funds grew by NT$20 billion to NT$50 billion, it said.
Assorted international funds took a hit with index-tracked bond funds shrinking by NT$81.1 billion and ETF equity funds declining by NT$20 billion, it said.
FSITC said that it is expecting similar capital movements this year, as COVID-19 infections are spiking in the US, Europe and other countries, and their central banks would maintain loose monetary policies over the next few years.
The US Federal Reserve, for example, has said that the chance of interest rate hikes is slim through 2023, FSITC said.
Against this backdrop, global capital would continue flowing to risky assets, mainly stocks, to pursue higher yields, it said, explaining why global bourses have rallied to record highs.
FSITC said that investors should take advantage of the trend and favor stocks over bonds, especially shares that benefit from a remote economy, artificial intelligence, cloud computing, self-driving vehicles and other innovative technologies.
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