Foreign exodus from Taiwan stocks is rapidly gaining pace

[HONG KONG] The foreign exodus from Taiwanese equities is intensifying as the local dollar weakens and concerns mount over Beijing's increasing pressure on Taipei.

Overseas investors have net sold about US$4.6 billion of local stocks in just 2 days this week, with Monday's (Mar 7) being the second-highest daily withdrawal on record, according to data compiled by Bloomberg.

Russia's invasion of Ukraine has refocused investor attention on the risk of Chinese military action against Taiwan and turned the island's assets into a proxy for fallout from the conflict in Europe.

While weaker sentiment sent stocks falling and foreign investors fleeing, a rebound may be near "given that the market has already received most of the Russia-Ukraine circumstances that could impact negatively", according to Huang Wen-ching, vice-president of Taishin Securities Investment Advisory.

Taiwan's benchmark Taiex rose Wednesday morning, trimming its drop this week to 3.9 per cent, compared with the broader MSCI Asia-Pacific gauge's 4.3 per cent slide.

Meanwhile, 8 state-backed banks were asked by Taipei on Tuesday to support the stock market, according to local media, citing an unidentified person.

Beijing issued a warning to the US on Monday against expanding ties with the island while rejecting comparisons between Taiwan and Ukraine. Chinese Foreign Minister Wang Yi said that one was a sovereign country and the other was an "inalienable" part of China.

The drop in the local dollar, which tumbled to the lowest since April on Tuesday, also reflects broader worries about stagflation as rising commodity prices add to already elevated price pressures.

Taiwanese equities have seen the largest year-to-date foreign outflow among Asian emerging markets tracked by Bloomberg, excluding China. BLOOMBERG