Taiwan's forex reserves rise; foreign investor asset holdings hit high

Taipei, June 6 (CNA) Taiwan's foreign exchange reserves at the end of May moved higher for the second straight month, while foreign investors' holdings in Taiwan-listed stocks, bonds and Taiwan dollar deposits hit a new high of almost US$1.9 trillion, according to the central bank.

Data released by the central bank Friday showed the country's forex reserves rose US$2.586 billion from a month earlier to US$605.07 billion as of the end of May, largely due to an increase in interest income as well as a rise in returns from the bank's management of the portfolio.

Tsai Chiung-min (蔡炯民), head of the Foreign Exchange Department, told reporters that the central bank intervened to smooth the Taiwan dollar's volatility in May but the intervention was two-way, offsetting the impact of each direction, which had only a limited impact on the month's forex reserves.

The May figure cemented Taiwan's status as the fourth-largest forex reserve holder in the world, behind China, Japan and Switzerland, according to the central bank.

The data also showed foreign investors held a record high of US$1.896 billion in Taiwan-listed stocks, bonds and Taiwan dollar deposits at the end of May, up from US$1.61 trillion at the end of April.

These holdings were the equivalent of 313 percent of Taiwan's total forex reserves in May, a ratio that also hit a new high, up from 268 percent at the end of April, the data indicated.

The significant growth of foreign investors' holdings in just one month came on the back of a booming stock market in May, when the Taiex, the Taiwan Stock Exchange's benchmark index, soared 5,806.31 points, or 14.92 percent, led by tech stocks, to come close to the 45,000-point mark amid optimism over AI development, Tsai said.

The high-flying bourse prompted foreign investors to raise their holdings of Taiwan dollar-denominated assets last month, adding that foreign investors still remitted US$6 billion into the local market even after moving their earnings out of the country, he added.

In terms of U.S. dollar movements, the greenback has faced uncertainty, in particular the impact of geopolitical unease, so it is not easy to predict how the American unit will move, Tsai said.

Meanwhile, the U.S. Federal Reserve is more likely to leave its key interest rates unchanged this year than to raise rates after new chair Kevin Warsh took office in late May, even though inflation continues to breach the Fed's 2 percent target, Tsai added.

The local central bank has said it will maintain ample forex reserves to ensure domestic financial markets remain stable and guard against any sudden movement of funds out of the country by foreign institutional investors.