The Impacts of Foreign Institutional Investors on Asian Emerging Markets and the Strategic Thinking of Taiwan
Date Issued
2014
Date
2014
Author(s)
Lin, Chao-Huan
Abstract
Capital markets are dynamic and hard to predict. In this report, we explore the potential impacts from foreign investors (capitals) to emerging markets (Taiwan equity markets in particular) & also try to identify any associated opportunities & risks for the Authorities’ further consideration and actions.
The rule of thumb for foreign investors’ investments into emerging market is to look for “higher growth and better diversification” outside of their own countries. On the other hand, we would see massive fund reversal back to the developed world (so called safe assets) if the reality (expectation) has gone to the other way, such as lower relative economic growth, richer valuation and tighter liquidity situation within emerging markets!
Taiwan, as a member of Asian emerging markets, is surly impacted by the fluctuation of foreign capitals. At this very moment, Taiwan equity and foreign exchange markets are largely moving alongside with news flows of US QE Tapering and potential rate hikes in the coming months! Hence, it is important to be aware of any possible impacts and risks in markets!
Also, the “marginalization” risk is very real for Taiwan capital markets in the foreseeable future in light of the strong rises of China and Korea within Asian emerging markets. As a result, it is certainly crucial for Taiwan to step up for quicker migration of technology sectors and capital market reform.
Further relaxation on Taiwan capital markets and having a strong domestic asset (wealth) management industry are the keys to mitigate the potential capital outflows from foreign investors. Moreover, it is essential for Taiwan Authorities to comprehend the nature of foreign investors (capitals) and also utilize them wisely so that we would have had a more efficient and healthier capital markets in Taiwan.
Subjects
外資
新興市場
投資策略
Type
thesis
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