Foreign institutional investors profited US$125.4 billion from their investments in the local stock market between January 2020 and August this year, despite ups and downs in Taiwanese shares during that period, the central bank said in a report last Tuesday.
The significant profit enjoyed by foreign institutional investors reflected their effective investment strategies, such as holding blue-chip stocks long-term and cutting their holdings of certain stocks at the right time, it said.
The US$125.4 billion profit included US$55.2 billion from cash dividends, the central bank said, adding that foreign institutional investors had sent most of their profits out of Taiwan.
Photo: Bloomberg
With Taiwan's profitable electronics sector, led by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), foreign institutional investors tended to park their funds in large-cap tech stocks with sound fundamentals and subsequently enjoyed an uptrend in share prices following a tech frenzy in global markets, it said.
In addition, foreign institutional investors were successful in finding the right time to sell TSMC shares and other tech heavyweights, while local investors tended to chase those stocks, the central bank said.
Between January 2020 and August this year, foreign institutional investors registered a return of about 57 percent in their stock investments in Taiwan, it said.
In the first eight months of this year, the TAIEX staged a strong comeback from a slump seen last year due to expectations that the US interest rate hike cycle would shortly come to an end.
Last year, the TAIEX plunged 22.4 percent after foreign institutional investors sold more than NT$1.2 trillion amid escalating geopolitical tensions following Russia's invasion of Ukraine and as the Fed pushed up its key interest rates aggressively.
In 2021, the TAIEX soared 23.7 percent despite a net sale of about NT$454 billion by foreign institutional investors, while the TAIEX surged 22.8 percent in 2020 even though foreign institutional investors dumped NT$540.15 billion worth of shares.
As of the end of August, foreign institutional investors had invested about US$562.5 billion in the local stock market, and in addition to their pocketed gains, they still had US$332.7 billion in unrealized profit, the central bank said.
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