Taiwan’s money supply, measured by M1B and M2 movements, logged annual gains of 17.74 percent and 9.21 percent respectively last month, suggesting a surge in liquidity as investors took shelter in cash amid market swings following a domestic outbreak of COVID-19 last month, the central bank said yesterday.
The narrow M1B money supply gauge, referring to cash and cash equivalents, advanced 17.74 percent, the second fastest increase in history, after demand deposits soared to a record high of NT$20.91 trillion (US$746.73 billion), the bank said.
The M1B increase was mostly due to panic selloffs on the local bourse following a spike in virus infections and the implementation of a nationwide level 3 COVID-19 alert, the bank said, adding that institutional and individual investors stayed on the sidelines until the local outbreak stabilized.
This was the reason the M1B gauge outpaced the broader M2 gauge, which includes M1B, time deposits, time savings deposits, foreign currency deposits and mutual funds, it said.
Foreign fund inflows were US$3.25 billion, lower than in April, but enough to hoist the M2 level to a 22-year high, the bank said, adding that demand for mortgages and COVID-19-related loans also lent support.
Savings deposits by foreign investors reached NT$336.4 billion, an 87.18 percent increase from a year earlier and a 13-year high, despite portfolio managers of foreign funds trimming their positions in local shares, the bank said.
The fund movements reflected foreign investors’ positive views on local shares, as they parked ample money in Taiwan after portfolio adjustments, the bank said.
Securities accounts exceeded NT$3 trillion for the first time on record in May, but retail investors turned cautious as evidenced by a decline in margin loans, the bank said.
The number of retail investors last month dropped to 67.2 percent, from 70 percent in April, as some opted out, scared by an abrupt and rapid TAIEX retreat, the bank added.
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