Oct 05, 2019 Market Comments Off on Taiwan’s forex reserves hit new record high at end-September
Taipei-Taiwan's foreign exchange reserves at the end of September hit a record high largely due to a massive fund inflow into the country, according to the Central Bank.
An increase in returns on the central bank's investment portfolio also drove up forex reserves last month, the central bank said.
Data compiled by the bank showed that the country's forex reserves as of the end of September stood at US$469.49 billion, up US$1.32 billion from August.
It was the fourth consecutive month for Taiwan to record a new high in forex reserves, the data indicated.
Harry Yen (???), head of the bank's Foreign Exchange Department, said the bank stepped into the local foreign exchange market last month by buying the U.S. dollar to slow down the pace of the Taiwan dollar's appreciation against the greenback, when foreign institutional investors moved large funds into the country.
Yen said the central bank's intervention was aimed at smoothing the local forex market to prevent overly violent fluctuations in the Taiwan dollar, since it was the bank's duty to maintain order and stabilize the market.
In September, the Taiwan dollar rose 1.17 percent against the greenback.
Yen said the weakness of the U.S. dollar partly reflected market expectations that the U.S. Federal Reserve would further cut its key interest rates to stimulate the economy. The United States and China were also set to resume talks in October, prompting investors to bet on non-U.S. dollar denominated assets, which sent the greenback even lower, he said.
Central Bank Governor Yang Chin-long (???) admitted in a quarterly policymaking meeting held on Sept. 19 that the bank intervened in the local forex market due to a large fund inflow. Yang said the presence of more foreign funds showed foreign investors' faith in Taiwan's economic growth.
So far this year, the central bank has repeatedly entered the local forex market on the back of massive fund flows into and out of Taiwan in short periods.
According to the Financial Supervisory Commission, the top financial regulator in Taiwan, foreign institutional investors recorded a net fund inflow of about US$3 billion into Taiwan in September, stopping a two-month streak of net fund outflow.
Since the government lifted a ban on foreign institutional investments in the local bourse at the end of 1990, a total of US$202.53 billion in foreign net fund inflow into Taiwan has been recorded, the FSC's data showed.
In the first nine months of this year, foreign institutional investors bought a net NT$8.71 billion (US$281 million) worth of shares on the local main board, while a net buy on the over-the-counter market totaled NT$14.10 billion, the FSC's data indicated.
Due to the foreign fund inflow in September, the benchmark weighted index on the Taiwan Stock Exchange rose 211.63 points or 1.99 percent in September.
As a result of higher equity prices in the local market, the central bank said that at the end of September, the holdings of Taiwanese stocks, bonds and Taiwan dollar-denominated deposits by foreign investors totaled US$381.1 billion, up US$16.7 billion from the end of August.
As a result, foreign-held assets at the end of September were equal to about 81 percent of Taiwan's foreign exchange reserves, up from 78 percent at the end of August, central bank data showed.
The bank has said it is committed to maintaining ample forex reserves by improving investment returns to guarantee secure financial markets at home, even if foreign institutional investors move funds out of the country.
Source: Focus Taiwan News Channel
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