Foreign institutional investors registered net fund inflows last month, reversing four consecutive months of net fund outflows, after the Financial Supervisory Commission introduced restrictions on short selling on the stock market at the beginning of the month.
Data compiled by the commission showed foreign institutional investors recorded US$456 million in net fund inflows last month after US$577 million in net fund outflows in September.
The commission introduced three rounds of measures to restrict short selling over three weeks last month, citing the need to ameliorate volatility on the local equity market as foreign institutional investors continued to move funds out of the country in the wake of an aggressive rate-hike cycle by the US Federal Reserve.
Photo: CNA
In the latest round of tightening measures announced on Oct. 21, a stock that closed down by 3.5 percent or more in the previous session would prohibit investors from using the previous closing price or a lower price to short the stock by borrowing securities.
From June to September, foreign institutional investors registered US$18.84 billion in net fund outflows from Taiwan, and the average monthly net fund outflow has topped US$5 billion since July, as the interest-rate gap between the US and Taiwan has been widening.
Ahead of a 75 basis-point hike on Wednesday, the Fed had raised its key interest rates by 300 basis points since March. In contrast, Taiwan’s central bank has only increased rates by 50 basis points so far this year as domestic inflation is not as strong as in the US.
In a rush to park funds in US dollar denominated assets, foreign institutional investors recorded US$22.02 billion in net fund outflows in the first 10 months of this year.
From January to last month, foreign institutional investors sold a net NT$1.19 trillion (US$36.97 billion) on the local equity market, the commission said.
The National Stabilization Fund’s governing committee on July 12 authorized a NT$500 billion fund to shore up share prices.
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