Taipei, Sep 10 (CNA) Foreign institutional investors saw net outflows of funds for the third consecutive month in August, according to the Financial Supervisory Commission (FSC), Taiwan’s top financial regulator.
Data compiled by the FSC showed that foreign institutional investors recorded net outflows of $5.45 billion in August, bringing total net outflows to $13.07 billion or NT$401.2 billion. during the June-August period.
The sharp outflows were attributed to the widening interest rate differential between Taiwan and the United States, and FSC officials said any decision by the US Federal Reserve to adjust its monetary policy will dictate without no doubt the movements of funds in the world.
Since the Fed launched a rate-hike cycle in March to address soaring inflation, foreign institutional investors have seen $11.58 billion in net outflows of funds from March to April, before to pass to the other side by registering a slight net inflow of funds worth almost 2.7 dollars. billion in May.
Rising rates, inflation
However, foreign institutional investors saw net outflows of funds again in June and acted more aggressively in the following two months, according to the FSC.
Since March, the Fed has raised its key interest rates by 225 basis points, while the central bank of Taiwan has only raised interest rates by 37.5%.
Taiwan’s central bank argued that although the local consumer price index topped the 2% alert, inflation rates were still dwarfed by those seen in the United States.
In August, Taiwan’s CPI rose 3.36% from a year earlier in July before moderating to 2.66% in August.
Meanwhile, CPI growth in the United States was 8.5% in July, down from 9.1% in June.
US inflation data for August is expected to be released next week.
The market widely anticipated that the Fed would hike rates another 75 basis points after the conclusion of a policy-making meeting on Sept. 21.
Meanwhile, Taiwan’s central bank is expected to raise rates by 12.5 to 25 basis points at its quarterly policymaking meeting scheduled for September 22.
In the first eight months of this year, foreign institutional investors recorded net outflows of $16.7 billion. During the same period, the Taiex, the weighted index of the Taiwan Stock Exchange, plunged 3,213.40 points, or 17.14%.
Since the government lifted the ban on foreign institutional investment in the local stock exchange in late 1990, foreign institutional investors have accumulated 212.86 billion U.S. dollars in net inflow of funds into Taiwan in August, data shows. of the FSC.
From January to August, foreign institutional investors sold NT$1 trillion net in the local equity market as they rushed to put their money into dollar-denominated assets due to rising market yields American, said the FSC.
The FSC said the sharp selloff was the result of volatility in global markets, but added the commission was confident foreign investors would refocus on Taiwan’s sound longer-term fundamentals.
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