The nation’s money supply slowed last month as firms and individuals shifted funds to time deposits and other investment tools overseas in pursuit of higher yields, the central bank said on Monday.
The M1B money supply gauge — cash, demand deposits and other liquid deposits — grew 2.01 percent year-on-year, but shed 0.05 percent from February, as firms cut demand deposits and raised holdings in time deposits and other investment vehicles, the central bank said.
“The M1B movements had much to do with the central bank’s monetary policy decisions,” the bank said.
Firms have converted some cash positions into time deposits to take advantage of interest rate hikes, it said.
The central bank dismissed the idea that the M1B data reflected TAIEX trends, saying that the local bourse often takes its cue from Wall Street, especially global technology and semiconductor plays that are major clients of local electronics suppliers.
The stock market is not lacking liquidity, as investors can channel money from time deposits into securities accounts instantly, the central bank said, adding that funds in securities accounts increased NT$11.5 billion (US$374.1 million) to NT$3.14 trillion, the third consecutive monthly increase.
The broader M2 measure, which encompasses time deposits, time saving deposits, foreign currency deposits, mutual funds and M1B, grew 6.58 percent year-on-year, but also lost momentum over the past few months, the central bank said.
The trend is consistent with poor exports, which weighed on the contributions of trade settlements, it said.
Local life insurance companies and pension fund managers facilitated the trend by increasing their holdings in foreign bonds and securities, the central bank said, adding that a rapid increase in overseas travel by Taiwanese had helped decelerate M2 data.
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