Taiwan records 12-year high in net fund inflows in 2021

Taiwan registered a 12-year high in net fund inflows in 2021 after recording a large net fund inflow from foreign institutional investors in December for the second consecutive month, according to the Financial Supervisory Commission (FSC).

Data compiled by the FSC, the top financial regulator in Taiwan, showed that the country recorded a net fund inflow of about US$21.05 billion in 2021 after a net fund inflow of US$6.1 billion in November and another net fund inflow of US$4.76 billion in December.

The November figure was the highest monthly figure in more than 10 years, reversing a net outflow of US$158 million in October, the FSC said.

FSC officials said the large net fund inflow in 2021 reflected foreign institutional investors' faith in Taiwan's economic fundamentals, which is expected to pave the path for future investments in the local equity market.

Since the government lifted a ban on foreign institutional investments in the local bourse at the end of 1990, foreign institutional investors have accounted for an accumulated total of about US$229.60 billion in net fund inflows into Taiwan as of December, which continued to smash records, the FSC data indicated.

Along with a strong export performance, the large foreign fund inflow gave a boost in 2021 to the Taiwan dollar, which rose by NT$0.818 or 2.95 percent against the U.S. dollar to close at NT$27.690 against the greenback on Dec. 30, 2021, the highest level in the last trading session of the year in 25 years.

The growth of the local currency was the highest in Asia in 2021, higher than the Chinese yuan, which rose about 2.7 percent against the U.S. dollar.

In 2021, the Taiex, the benchmark weighted index on the Taiwan Stock Exchange (TWSE), rose by 3,486.31 points or 23.7 percent from the end of 2020 to close at 18,218.84 on Dec. 30, the last trading session for 2021, boosting the main board's market capitalization by NT$12 trillion (US$430 billion) to NT$56 trillion.

The NT$12-trillion increase was the third-highest annual growth in the TWSE's history, allowing investors to earn an average of NT$960,000 in profit.

Despite the gains in the Taiex, foreign institutional investors sold a net NT$449.01 billion worth of shares on the main board and registered a net sell of NT$48.04 billion worth of shares on the over-the-counter market in 2021, the FSC's data showed.

But, foreign institutional investors shifted to the buy side on the local equity market in November and December, when their net buys reached NT$13.27 billion and NT$60.28 billion, respectively, after a net sell of NT$158 billion in October.

The net sell for 2021 came after foreign institutional investors locked in their earlier profits to take advantage of a strong showing on the Taiex but many of them still kept the funds in Taiwan, which maintained the strength of the Taiwan dollar, according to some analysts.

These analysts added that foreign institutional investors started to rebuild their positions, in particular in December, by picking up large-cap tech stocks such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market.

Source: Focus Taiwan News Channel