The nation’s M2 broad monetary gauge last month grew faster than the narrow M1B indicator, resulting in the first so-called “death cross” in four years, the central bank said yesterday.
The phenomenon occurs when people start putting cash away and opt for the safety of time deposits to cope with economic uncertainty.
However, the monetary policymaker had a different interpretation, saying the latest movements of M1B and M2 stemmed from continued capital outflows, as well as softening investment and loan demand.
Photo: Chen Mei-ying, Taipei Times
M1B refers to cash and cash equivalents, while M2 encompasses M1B, time deposits, time savings deposits, foreign currency deposits and mutual funds.
“There is no need to overreact, as there is still ample liquidity in the market to support economic activity, despite a slowdown in both measures,” the central bank said.
Data on time deposits and foreign currency deposits have little to do with the TAIEX’s performance, it said, adding that foreign currency deposits rose 15.23 percent from a year earlier, although they eased from a 17.64 percent pickup in June.
Securities accounts, a widely used confidence gauge of retail investors, climbed back above NT$3.1 trillion (US$102.4 billion), although margin balances dropped to a 19-month low of NT$248.3 billion, the central bank said.
That is because the TAIEX weakened to 13,951 points on July 12 due to China’s military exercises in the Taiwan Strait, putting selling pressure on margin traders.
The National Stabilization Fund later stepped in and helped restore confidence, the central bank said.
It is too early to pass judgement on a recovery in stock investment, as securities accounts received a significant boost from cash dividend payouts of NT$950 billion last month, the central bank said, adding that the factor would continue to affect the overall balance this month.
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