The US$16.5bn rise in official foreign reserves reported by Taiwan today is impressive enough. But it pales almost into insignificance compared with the $52.4bn rise in foreign portfolio capital held in either NT$ deposits or Taiwanese securities. Those holdings came to $603.1bn, up by $148.1bn on the year, and, as the chart shows, breaking out from a quite steady c$400bn range sustained over the previous two years. Put simply, private capital has been barreling into Taiwan this year, and particularly in 4Q, at unprecedented rates.
It causes loads of issues. First, central bank is having to intervene in scale to keep the NT$ from appreciating. Second, for the first time, foreign portfolio holdings in Taiwan are now greater than Taiwan's official foreign reserves: foreign holdings are $603bn, vs foreign reserves of only $529.9bn.
All this whilst China ratchets up its rhetoric against the republic. Is Hong Kong's capital simply relocating?
