Taiwanese investors are ramping up purchases of bond exchange-traded funds (ETFs) as they seek to lock in higher yields before a potential US Federal Reserve interest-rate cut.
Local investors poured a net US$6.6 billion into ETFs that track overseas bonds so far this year, the fastest inflow since Taiwan listed its first fixed-income ETF in 2017.
The amount accounts for more than half the total investment by Asia Pacific investors, data compiled by Bloomberg showed.
Photo: CNA
Taiwan investors are buying bond ETFs as fading bets for deep Fed rate cuts this year push up US Treasury yields, making them more attractive than local notes amid the prospect of a steady domestic policy rate this year. The premium offered by 10-year Treasuries over similar bonds in Taiwan widened to the most in three months last month.
“Insurers and retail investors are rushing to catch the final train before the Fed’s interest rate cut, so there’s a new batch of capital flowing into these ETFs in the first half,” CTBC Investments Co (中信投信) fixed-income vice president Ryan Chang (張勝原) said. “Investors are hoping for price gains in addition to high yields of overseas bonds because of a possible Fed pivot.”
Chang sees the local ETF market growing to NT$3 trillion (US$95.15 billion) this year.
Investors from other countries are also making a beeline for US debt. Total outflows from emerging markets into foreign bond ETFs have amounted to about US$815 million so far this year.
However, in Taiwan, bond ETF purchases are weighing on the New Taiwan dollar, which has weakened about 2.6 percent against the US currency so far this year. That contrasts with the benchmark TAIEX, which touched a record high due to demand for artificial intelligence technology.
Bond ETFs makes sense because of the interest-rate differential, Allianz Global Investors chief investment officer for Asia-Pacific fixed income Jenny Zeng (曾崢) said.
“Banks are also buying dollars because of month-end rebalancing,” she said, adding that bond outflows from Asia might ease toward the second half of the year when the Fed starts to cut rates.
When an apartment comes up for rent in Germany’s big cities, hundreds of prospective tenants often queue down the street to view it, but the acute shortage of affordable housing is getting scant attention ahead of today’s snap general election. “Housing is one of the main problems for people, but nobody talks about it, nobody takes it seriously,” said Andreas Ibel, president of Build Europe, an association representing housing developers. Migration and the sluggish economy top the list of voters’ concerns, but analysts say housing policy fails to break through as returns on investment take time to register, making the
NOT TO WORRY: Some people are concerned funds might continue moving out of the country, but the central bank said financial account outflows are not unusual in Taiwan Taiwan’s outbound investments hit a new high last year due to investments made by contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and other major manufacturers to boost global expansion, the central bank said on Thursday. The net increase in outbound investments last year reached a record US$21.05 billion, while the net increase in outbound investments by Taiwanese residents reached a record US$31.98 billion, central bank data showed. Chen Fei-wen (陳斐紋), deputy director of the central bank’s Department of Economic Research, said the increase was largely due to TSMC’s efforts to expand production in the US and Japan. Investments by Vanguard International
WARNING SHOT: The US president has threatened to impose 25 percent tariffs on all imported vehicles, and similar or higher duties on pharmaceuticals and semiconductors US President Donald Trump on Wednesday suggested that a trade deal with China was “possible” — a key target in the US leader’s tariffs policy. The US in 2020 had already agreed to “a great trade deal with China” and a new deal was “possible,” Trump said. Trump said he expected Chinese President Xi Jinping (習近平) to visit the US, without giving a timeline for his trip. Trump also said that he was talking to China about TikTok, as the US seeks to broker a sale of the popular app owned by Chinese firm ByteDance Ltd (字節跳動). Trump last week said that he had
STRUGGLING TO SURVIVE: The group is proposing a consortium of investors, with Tesla as the largest backer, and possibly a minority investment by Hon Hai Precision Nissan Motor Co shares jumped after the Financial Times reported that a high-level Japanese group has drawn up plans to seek investment from Elon Musk’s Tesla Inc to aid the struggling automaker. The group believes the electric vehicle (EV) maker is interested in acquiring Nissan’s plants in the US, the newspaper reported, citing people it did not identify. The proposal envisions a consortium of investors, with Tesla as the largest backer, but also includes the possibility of a minority investment by Hon Hai Precision Industry Co (鴻海精密) to prevent a full takeover by the Apple supplier, the report said. The group is
RSS