Taiwan's M2 money supply growth at four-year high

Taiwan's broadest measure of money supply, M2, is growing at its fastest pace in four years, the central bank said on Monday, underscoring forecasts of strong economic expansion this year.
Last month's M2 was 7.89 percent higher than in March 2003 due to a steady rise in bank loans and investments, inflows of foreign equity capital, and a low base of comparison, the central bank said.
The pace of growth had accelerated from February's 6.8 percent year-on-year rise and was the fastest since March 2000, the bank said.
Taiwan forecasts the economy to expand 4.7 percent this year over 2003, when economic growth was 3.2 percent. M2 growth has risen steadily since a record low in April of last year.
March's M1A money supply - which includes cash, checking accounts and passbook deposits - rose 23.41 percent year on year, after February's 18.56 percent increase.
M1B, which is M1A plus savings accounts, grew 23.75 percent last month after February's 20.42 percent rise, indicating investors were moving funds into savings accounts for investment in the stock market.
The TAIEX has gained about 14 percent in the first three months of this year, partly on investor optimism over strong quarterly earnings and a rise in US stocks.
The United States is one of Taiwan's biggest trade partners as many of the island's cutting-edge technology companies makes parts for US brands.
March's M2 growth exceeded the central bank's target zone of 2.5 percent to 6.5 percent for 2004, which was raised from last year's target of 1.5-5.5 percent.
"We will review our target range in the middle of the year. In the past six years, we haven't changed our policy mid-year because it has always been in the target range, " said Chrystal Shih, director general of economic research at the central bank.
She said the central bank has made no decisions on whether to tighten monetary policy as a result of the stronger-than-expected M2 growth. "We'll just have to wait and see," she said.
Domestic demand is expected to underpin almost 80 percent of economic growth this year, adding to strong exports.