Mon, May 23, 2022 page12

• Outflows hit high on foreign investment

  RATE-HIKE LURE: A spike in US Treasury yields, along with the start of foreign interest rate raises, has prompted Taiwanese financial institutions to park funds overseas

  • Staff writer, with CNA
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  Fund outflows from Taiwan reached a record high in the first quarter of this year, marking the 47th consecutive quarter of cash transferring out of the country, as the central bank attributed the pattern to overseas bond investments by Taiwanese financial institutions.

  It was the third straight quarter that Taiwan reported record high fund outflows.

  Data compiled by the central bank showed net outflows in Taiwan’s financial account — which measures the flow of direct investment and portfolio investment — totaled US$32.22 billion in the January-to-March quarter, up from US$18.56 billion a year earlier.

  

  New Taiwan dollar and US dollar banknotes are displayed in Taipei on Dec. 15, 2020.

  Photo: CNA

  The first quarter’s fund outflow also beat the US$31.78 billion recorded in the fourth quarter of last year, the central bank’s statistics showed.

  A spike in US Treasury yields prompted many Taiwanese financial institutions to park funds overseas after the US Federal Reserve introduced a rate-hike cycle that began in March, bank officials said.

  The increase in net fund outflows came after portfolio investments abroad posted a net asset increase of US$49.92 billion, as insurance companies raised their investment in debt securities overseas, they said.

  Out of the US$49.92 billion, residents’ portfolio investment abroad posted a net increase of US$35.21 billion on the back of a rise in overseas debt securities investment by insurance companies as well as other financial institutions, bank officials said.

  Non-residents’ portfolio investment recorded a net fall of US$14.72 billion, as foreign investors reduced equity holdings in the local stock market in the first quarter, when the TAIEX shed 525.37 points, or 2.88 percent, after foreign institutional investors sold a net NT$459 billion (US$15.48 billion).

  Over the past 47 quarters, accumulated net fund outflows hit US$660.51 billion, equivalent to more than seven years of Taipei’s tax revenue.

  Addressing concerns that investors could continue to move funds out of the country and into US dollar-denominated assets, the central bank said that net financial account outflows are common among countries like Taiwan, which have a long-term current account surplus.

  Other countries, like Japan, Singapore, South Korea and Germany, which have all had such a surplus, have also tended to record net financial account outflows, the bank said.

  A current account mainly measures exports and imports of merchandise and services.

  Taiwan in the first quarter recorded a current account surplus of US$30.68 billion, up US$4.85 billion from a year earlier, reporting a US$20.47 billion surplus in commodity trade, up US$1.7 billion from a year earlier, due to solid global demand for technology products amid a digital transformation.

  Additionally, service trade reported a surplus of US$4.34 billion, a new quarterly high, due to increases in cargo shipping revenue amid tight supply, the central bank said.

  Meanwhile, the central bank’s reserve assets rose only US$260 million, as the bank entered the foreign exchange market by selling US dollars to cap the depreciation of the New Taiwan dollar against a strong greenback.
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