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Low turnover in equity market reflects U.S. rate hike fears: FSC

Low turnover in equity market reflects U.S. rate hike fears: FSC

Recent thin turnover in the local equity market reflected lingering worries over a possible interest rate hike in the United States, Chairman of the Financial Supervisory Commission Tseng Ming-chung said Tuesday.

Tseng said rising concerns that the U.S. Federal Reserve will kick off an interest rate hike, likely in December, have turned many investors away from the trading floor and dragged down trading volume in the local equity market.

On Monday, turnover on the local main board fell to NT$70.6 billion (US$2.17 billion) from NT$76.3 billion recorded a session earlier. Monday's turnover was lower than the daily average of NT$80 billion recorded a week earlier. Although turnover recovered to NT$80.42 billion Tuesday, the level remained thin and raised fears that more and more investors here are reluctant to trade.

After Washington reported earlier this month the better-than-expected non-farm payroll data for October, concerns over a rate hike by the Fed in the upcoming policymaking meeting scheduled for December have been running deeper.

In addition, the minutes of the last Fed's policymaking meeting held in October released last week showed that the U.S. central bank is ready for a rate increase, and the document prompted investors to expect an imminent rate hike.

Tseng said that the FSC has instructed the Taiwan Securities Association to tell its members to communicate with major market players for a better understanding on why they have stayed out of the trading floor for the moment.

He said that he hopes that more communication with these major players will persuade them to come back to the local market and their increasing presence is expected to boost daily turnover in the equity market.

Due to rising hopes of a rate hike by the Fed, the U.S. dollar index, which tracks the value of the greenback against the currencies of the U.S.'s major trading partners has been on the rise and topped the 100 point mark.

Therefore, Tseng said that a stronger U.S. dollar has raised fears of more fund outflows from Taiwan, which is the last thing the local equity market wants to see. But, Tseng said that as long as uncertainty imposed by the rate increase by the Fed is removed, trading in the local stock market is expected to return to normal.

Updated : 2021-09-19 13:19 GMT+08:00