Foreign investors speed up fund outflows

Foreign institutional investors speeded up their pace of remitting funds out of Taiwan in the first half of November, according to data compiled by the Financial Supervisory Commission (FSC).

The FSC data shows that during the Nov. 1-15 period, foreign institutional investors made a net fund outflow of US$1.799 billion, almost as much as the US$1.916 billion in net fund outflow recorded for the whole of October.

On Nov. 15 alone, net foreign fund outflow from Taiwan hit US$690 million, the FSC statistics indicate.

Market analysts said that the fund outflows largely reflected expectations that the U.S. Federal Reserve will hike its key interest rates soon, prompting foreign institutional investors to park their funds in U.S. dollar-denominated assets, betting on a stronger greenback in the near future.

Analysts said that since Donald Trump won the U.S. presidential election on Nov. 8, the market has widely anticipated that the president-elect will come up with an infrastructure investment plan.

They said that Trump's fiscal stimulus package is expected to boost inflation and in turn lead the Fed to speed up the pace of its interest rate hike cycle, paving the way for a higher greenback.

Since the beginning of November, the local equity market has faced more visible volatility on massive foreign institutional selling, due to uncertainty over the U.S. presidential election and Trump's victory.

According to the Taiwan Stock Exchange, foreign institutional investors had sold a net NT$92.30 billion (US$2.91 billion)-worth of shares on the main board during the Nov. 1-16 period after NT$1.86 billion in net selling was recorded for the whole of the previous month.

In October, the FSC said, foreign institutional investors stopped a four-month streak of net inflow into Taiwan. In the past month-and-a-half, foreign investors recorded about US$3.72 billion in net fund outflow from Taiwan, which has attracted attention from the FSC.

Since the government lifted a ban on foreign institutional investment in the local bourse at the end of 1990, foreign institutional investors had made an accumulated US$202.81 billion in net fund inflows into Taiwan as of Nov. 15, a record low since late June, when a referendum held in the United Kingdom decided to withdraw the country from the European Union.

In response to the speedy foreign fund outflows, Wang Yung-hsin (???), director of the FSC's Securities and Futures Bureau, said that the commission has watched closely how foreign institutional investors move their funds, in a bid to ensure the stability of the local equity market.

Wang said that the FSC, the top financial regulator in Taiwan, has already taken measures to take on possible further fund outflows, such as a move to encourage listed companies to buy back their shares from the open market, and a hike in deposits for credit trading in the local equity market.

Source: Focus Taiwan News Channel