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Financial accounts suffers net outflow for 8th strait quarter in Q2.

Taipei, Aug. 21, 2012 (CENS) -- In the second quarter this year, Taiwan's financial account under the balance of payment suffered a net outflow for the eighth quarter in a row, with the accumulated amount of net outflow reaching US$51.3 billion, about one eighth of the nation's forex reserves. The net outflow in financial account may continue in the third quarter, when many foreign investors will remit their stock dividends. The aggravation of the outflow in financial account may lead to the repetition of the situation during the global financial tsunami, when the nation's financial account suffered 10 consecutive quarters of net outflow.

The consecutive outflow in financial accounts underscores lack of interest among domestic and foreign investors in domestic financial products.

The Central Bank of China (CBC) reported yesterday (August 20) that Taiwan's balance of payment scored a surplus of US$3.11 billion in the second quarter, with the current account racking up US$10 billion of surplus and financial account suffering U$6.99 billion of net outflow. In the first half this year, the current-account surplus reached US$20.96 billion and financial-account net outflow amounted to US$10.46 billion, leading to US$8.21 billion surplus in the balance of payment.

The CBC noted that under the financial account, direct investments and securities investments racked up net outflow of US$1.96 billion and US$13.53 billion, respectively, in the second quarter. Securities investment recorded the largest outflow in the recent three quarters. Meanwhile, due to collection of overseas short-term loans and syndicated loans by domestic banks, other investments racked up net outflow of US$8.09 billion.

Insurance firms purchased large amount of overseas bonds and local residents increased their subscription to overseas mutual funds, leading to US$7.42 billion of net outflow for overseas securities investments by local residents in the second quarter. The protracted European-debt crisis prompted foreign investors to reduce their holdings of Taiwanese stocks, leading to net outflow of US$6.11 billion for securities investments in the second quarter.

Lin Shu-hua, deputy director of the economic research department, the CBC, remarked that continuous outflow in financial account underscores limitation on NT dollar-denominated investment instruments, adding that outflow in direct investments results from active investments in mainland China by domestic firms.

In current account, due to high comparison base last year, the transformation of mainland China's economy, and slackened European and U.S. economies, exports in the second quarter dropped 5.5% year-on-year in the second quarter, when imports declined 5.8%, due to reduction in export-derived demand and imported capital goods. Merchandise trade surplus decreased to US$5.62 billion, down US$140 million from a year earlier and a five-quarter low.

Thanks to growth in net income from triangle trade and travel income, service income in the second quarter was the second highest ever. In the second quarter, mainland Chinese travelers soared 63.63%, injecting US$2.9 billion of travel income.
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Author:Liu, Philip
Publication:The Taiwan Economic News
Geographic Code:9TAIW
Date:Aug 21, 2012
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