Amid the ongoing pandemic, institutional investors like Taiwanese insurer Cathay Life Insurance are increasingly eyeing fixed income opportunities abroad.
According to Cathay Life’s first quarter financial statement, the fair value of its overseas bonds assets grew 38.8% from end of last year to March of this year. The firm didn’t provide a breakdown by asset type under its fixed income investment pool, but did highlight its offshore investment intentions.
A spokesperson from the company told AsianInvestor that the group continues to see offshore bonds as attractive destinations for investments.
Taiwanese insurers are only allowed to invest 65.25% of their investable assets overseas, but this limit does not take into account a quota on assets from foreign-currency policies. In March, the Financial Supervisory Commission (FSC) proposed to increase this quota from 35% of the capital reserve for non-investment-linked policies to 40%, allowing insurers to invest more overseas.
At the end of 2020, Cathay Life had formed an environmental, social and corporate governance (ESG) committee consisting of 45 in-house experts.
The FSC last year encouraged listed companies to volunteer ESG information, but many ended up not doing so. As a result, the commission has made it mandatory for all listed firms to disclose the data from next year onwards, Securities and Futures Bureau deputy director-general Tsai Li-ling told a videoconference held last month.
Starting next year, listed firms will be required to disclose their power and water consumption as well as waste management specifics to allow investors to evaluate their ESG performance.
Meanwhile, foreign buyers have been dumping Asian equities over mounting concerns of coronavirus variants, value adjustment needs, and as a consequence of China’s crackdown on its tech giants and other big industry players.
Data from stock exchanges showed that in July alone, cross-border investors sold equities worth a combined net total of $10.6 billion in South Korea, Taiwan, Philippines, Vietnam, Indonesia, and India. This was in stark contrast to an outflow of just $725 million in June, according to Reuters.
Meanwhile, from mid-July to mid-August, the Taiwan Capitalization Weighted Stock Index had fallen as much as 4.5%, although the benchmark recorded a bounce back of more than 12% since mid-May’s lowest.
The outflow shows increasing concerns about the pandemic across the region. “We may see more rotations and value adjustments in the following six to 12 months,” Steven Huang, head of investment at PineBridge Investments Taiwan, told AsianInvestor.
For Taiwan equities and US equities in particular, Huang sees value adjustments and sector rotations.
“Semiconductor and tech stocks have seen higher returns, and we do believe retail, tourism, and other services providers will see a gradual recovery from the pandemic,” Huang said. He noted that compared with the volatile equities market, fixed income assets have become a more reliable choice for some institutional investors.