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It is hard to overstate the scale of the recent foreign bond purchases by Taiwan's life insurers.
The lifer outflow more or less accounts for Taiwan's entire (large) current account surplus
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cfr.org/blog/shadow-fx…
The lifer outflow more or less accounts for Taiwan's entire (large) current account surplus
1/x
cfr.org/blog/shadow-fx…
The majority of the assets of Taiwan's life insurers have now been invested abroad.
And that's a significant change from 10 years ago
And that's a significant change from 10 years ago
The total sum that Taiwan's lifers have invested abroad -- counting the exposure obtained through domestic ETFs that invest in foreign bonds -- is rapidly rising toward 100% of Taiwan's GDP.
That's nuts
That's nuts
Some of the resulting fx exposure is naturally hedged with domestic fx policies. Some of the fx exposure isn't hedged at all (leaving the lifers exposed to the risk of TWD appreciation). But even so, the lifers have a roughly massive -- roughly $250b -- hedging need
5/x
5/x
And figuring out who has helped the lifers meet that need can help explain -- perhaps -- why Taiwan's dollar has remained so weak for so long ...
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6/x
From joint work with @stwill1 of Concentrated Ambiguity
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concentratedambiguity.wordpress.com/2019/10/04/sha…
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concentratedambiguity.wordpress.com/2019/10/04/sha…
