Taiwan halts 4 months of net equity fund outflows
Taipei, Nov 5 (CNA) Foreign institutional investors saw net fund inflows in October, reversing four consecutive months of net fund outflows, after the Financial Supervisory Commission (FSC) introduced restrictions on short selling in the stock market earlier this month, according to the FSC.
Data compiled by the FSC, Taiwan’s top financial regulator, showed foreign institutional investors saw $456 million in net fund inflows in October after $577 million in net fund outflows in September.
From the start of October, the FSC introduced three sets of measures to restrict short selling in three weeks, citing the need to improve volatility in the local stock market as foreign institutional investors continued to move funds out of the country following the aggressive rate hike cycle by the US Federal Reserve.
In the latest round of tightening measures announced on October 21, if a stock closed 3.5% or higher in the previous session, investors are prohibited from using the previous closing price or a lower price to sell. short the stock by borrowing securities.
During the June-September period, foreign institutional investors saw a total of $18.84 billion in net outflow of funds from Taiwan, and the average monthly net outflow of funds even exceeded $5 billion since then. July, at a time when the interest rate differential between the United States and Taiwan was widening.
Prior to a 75 basis point hike on Nov. 2, the Fed had raised key rates by 300 basis points since March, when the hawkish US central bank launched a rate hike cycle. However, the local central bank only raised rates by 50 basis points, saying inflation in Taiwan is not as bad as in the United States.
Rushing to park their funds in US dollar-denominated assets, foreign institutional investors saw $22.02 billion in net outflows of funds in the first 10 months of this year.
Since the government lifted its ban on foreign institutional investment on the local stock exchange in late 1990, foreign institutional investors had accumulated 207.55 billion U.S. dollars in net inflow of funds into Taiwan by October, data shows. of the FSC.
From January to October, foreign institutional investors sold NT$1.19 trillion ($37.07 billion) in the local stock market amid global volatility following the Fed’s aggressive moves to tighten monetary policy in order to combat high inflation, the FSC said.
Taiwan’s efforts to stabilize markets
In addition to the three sets of measures aimed at limiting short selling, the steering committee of the National Stabilization Fund on July 12 authorized the fund to intervene to support share prices.
The NT$500 billion stabilization fund was established in 2000 by the government to act as a buffer against unexpected external factors that could disrupt the local stock market.
November 4: Taiwan’s foreign exchange reserves end three-month streak of losses in October
November 4: Taiwan stocks end up slightly higher despite concerns over Fed action
October 21: Taiwan regulator tightens short-selling rules for third time in 3 weeks
October 8: Taiwan’s foreign exchange reserves fall again in September following market intervention
September 29: Central bank governor says there are no exchange controls while in office
September 22: Central bank raises interest rates by 12.5 basis points