Taiwanese investors are reassessing their long-held preference for US-dollar assets, shifting their bets to Europe in the latest move by global investors away from the greenback.
Taiwanese funds holding European assets have seen an influx of investments recently, pushing their combined value to NT$13.7 billion (US$461 million) as of the end of last month, the highest since 2019, according to data compiled by Bloomberg.
Over the first half of this year, Taiwanese investors have also poured NT$14.1 billion into Europe-focused funds based overseas, bringing total assets up to NT$134.8 billion, according to data from the Securities Investment Trust and Consulting Association (SITCA), the largest six-month injection since 2021.
Photo: An Rong Xu, Bloomberg
At the same time, Taiwan-based funds focusing on the US saw their combined value fall by NT$538 billion over the first half of the year, the largest six-month decline since Bloomberg first started compiling the data in 2003. Taiwanese assets in US-focused overseas funds declined by NT$121.6 billion, the biggest contraction since SITCA records began in 2006.
The shift represents a pivotal moment for Taiwan’s wealthy institutional investors, which have until now overwhelmingly favored the US when allocating money overseas. Taiwan is the 11th largest foreign holder of US Treasuries. The country’s investors held US$292.9 billion in US government bonds as of the end of May, according to the US Department of the Treasury’s data.
That is US$5.9 billion less than in April, the biggest monthly decrease since September 2022.
The change is not limited to Taiwan. US President Donald Trump’s tariff barrage, the growing budget deficit and widening political polarization have prompted Asia’s major exporting economies to seek alternatives for the combined US$7.5 trillion they have invested in US equities and debt.
“Institutional investors such as the banks and life insurers are moving their assets very quickly,” said Agnes Lin (林雅慧), markets strategist at JPMorgan Asset Management, which manages Taiwan’s largest Europe-focused fund. “It’s clear they have a strategy to diversify their allocations over the long term.”
Lin expects Taiwan’s retail investors to start focusing on the region as well if European shares extend their gains until next year.
More than 90 percent of the NT$22 trillion that Taiwan’s life insurance companies have invested overseas is in US dollars, Financial Supervisory Commission data showed.
This concentration in US dollar-denominated assets presents a huge foreign exchange risk for these companies. The New Taiwan dollar’s historic surge against the greenback in early May caused combined foreign-exchange losses of more than NT$145 billion for local insurers.
Retail investors in US bond-focused exchange-traded funds were also affected by the currency’s dramatic appreciation, prompting renewed debate in Taiwan over the need for greater diversification.
The NT dollar has appreciated more than 10 percent versus the greenback so far this year, compared with a 0.9 percent depreciation versus the euro.
BNP Paribas Wealth Management for Asia-Pacific chief executive officer Arnaud Tellier said Taiwan’s wealthy families were shaken by the volatility in the local currency.
“We see now they really look at diversifying outside of US-denominated assets,” he said in a statement. “We see lots of questions about other currencies starting with the euro.”
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