Taipei: 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.
According to Focus Taiwan, data released by the central bank on 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. This increase was largely due to a rise in interest income and improved returns from the bank's portfolio management.
Tsai Chiung-min, head of the Foreign Exchange Department, informed reporters that the central bank intervened to stabilize the Taiwan dollar's volatility in May. However, the intervention was two-way, balancing the impacts in each direction, which resulted in only a limited impact on the month's forex reserves.
The May figure reinforced Taiwan's position as the fourth-largest forex reserve holder globally, following China, Japan, and Switzerland, as indicated by the central bank.
The data further demonstrated that 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 amounted to 313 percent of Taiwan's total forex reserves in May, a ratio that also reached a new high, increasing from 268 percent at the end of April.
The notable rise in foreign investors' holdings within just one month was driven by a thriving stock market in May. The Taiex, Taiwan Stock Exchange's benchmark index, surged by 5,806.31 points, or 14.92 percent, nearing the 45,000-point mark. This was led by tech stocks amid optimism over AI development, according to Tsai.
The buoyant market encouraged foreign investors to increase their holdings of Taiwan dollar-denominated assets last month. Tsai also noted that foreign investors remitted US$6 billion into the local market, despite moving some earnings out of the country.
Regarding U.S. dollar movements, Tsai mentioned that the greenback has faced uncertainty, particularly due to geopolitical tensions, making it challenging to predict its future movements.
Additionally, Tsai noted that the U.S. Federal Reserve is more inclined to keep its key interest rates unchanged this year than to raise them after new chair Kevin Warsh took office in late May, despite inflation continuing to exceed the Fed's 2 percent target.
The local central bank has committed to maintaining ample forex reserves to ensure the stability of domestic financial markets and to guard against any sudden fund movements out of the country by foreign institutional investors.