Foreign investors record net fund outflow of over NT$200 billion

09/07/2019 03:00 PM

Taipei, Sept. 7 (CNA) Amid volatility in the global financial markets at a time of rising trade tensions between the United States and China, foreign institutional investors registered a net fund outflow of more than NT$200 billion (US$6.39 billion) in August, according to the Financial Supervisory Commission (FSC).

In addition to the volatile equity markets worldwide, many foreign institutional investors which pocketed fat cash dividends from their investments here also moved their funds out of the country to boost the net fund outflow further in the month, the FSC said.

Data compiled by the FSC, the top financial regulator in Taiwan, showed foreign institutional investors recorded a net fund outflow of US$6.49 billion or about NT$202.76 billion in August, the highest monthly level in eight years.

The outflow was partly prompted by fears about the ongoing U.S.-China trade war.

On Aug. 1, Trump announced in a series of tweets that Washington would impose a 10 percent punitive tariff on an additional US$300 billion worth of Chinese goods, which came into effect on Sept. 1, after both sides resumed trade talks in Shanghai at the end of July, but failed to make any significant progress. The tariffs could rise to 25 percent, Trump said at that time.

Fears over the rising global trade tensions led to an inverted yield curve in the U.S. market, which occurs when short-term rates surpass long-term ones and indicates a possible recession, prompting investors around the world to dump their equity holdings.

As a result, the benchmark weighted index on the Taiwan Stock Exchange (Taiex) fell about 1.9 percent and the index of the over-the-counter (OTC) market shed 1.92 percent in August after foreign institutional investors registered a combined net sell of NT$120 billion worth of shares on the main board and the OTC market in the month.

Chang Cheng-shan (張振山), deputy director of the FSC's Securities and Futures Bureau, told the press that a yield curve inversion raised concerns over the economic outlook so it was no surprise that investors worldwide scrambled to move their funds out of the equity markets, including Taipei, to avoid more losses down the road.

Chang said the large net fund outflow also resulted from foreign institutional investors' repatriation of cash dividends they have received from their investments in recent months back home.

Citing the FSC's data, Chang said the companies listed on the local main board and the over-the-counter market issued about NT$1.4 trillion in cash dividends to their shareholders in the first eight months of this year.

Among the major cash dividend issuers, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock in the local market, has given more than NT$200 billion in cash dividends on its earnings for 2018.

As foreign institutional investors accounted for 38.5 percent of the local equity market's capitalization, they received about NT$546.7 billion so that foreign institutional investors still kept part of their funds in the local equity market.

Despite the fall in the Taiex in August, Chang said the local equity market had still gained 9.16 percent in the first eight months of this year, outperforming Tokyo (a 3.45 percent rise), Singapore (a 1.23 percent increase), Hong Kong (a 0.47 percent fall) and South Korea (a 3.59 percent decline.)

He said Taiwan's equity market remained fundamentally sound and with cash dividend payments on the rise, the local market was still attractive to foreign investors.

Since the government lifted a ban on foreign institutional investments in the local bourse at the end of 1990, a total of US$199.55 billion in foreign net fund inflow into Taiwan has been recorded, the FSC said. (Liu Pei-cheng and Frances Huang)


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