US remains largest debtor nation for local banking sector
The US remained the largest debtor nation to Taiwan’s banking sector in the final quarter of last year, as Taiwanese displayed a keen interest in US government and corporate debt, the central bank said yesterday.
The trend could sustain this year after the US Federal Reserve kept interest rates unchanged for three straight quarters and is considering rate cuts to support the economy if necessary, the central bank said.
Data compiled by the central bank showed that outstanding claims by Taiwan’s banking sector to the US totaled US$168.32 billion as of December last year, rising 10.8 percent to account for a 29.37 percent share.
High interest rates in the US have made its bonds an attractive investment and prices would rise once the Fed cuts interest rates, the central bank said.
Bonds and interest rates have an inverse relationship — when rates go up, bond prices go down, and when interest rates decline, bond prices rise, it said.
The exposure stemmed from short-term capital arrangements, rather than long-term investment in manufacturing facilities, it added.
China ranked second in terms of local lenders’ exposure at US$48.41 billion, a 4.84 percent increase from three months earlier, the central bank said.
The central bank attributed the advance mainly to the yuan’s appreciation against the greenback by 2.94 percent during the period.
Luxembourg and Australia were in third and fourth places respectively, followed by Hong Kong, the central bank said.
Japan and the UK were the sixth and seventh debt destinations at US$33.38 billion and US$19.7 billion respectively, it said.
Singapore rose four places to eighth, as the city-state gains importance as a regional financial hub.
South Korea and Vietnam occupied the ninth and 10th positions respectively, with exposure to Vietnam shedding 1.11 percent from three months earlier, the central bank said.