Taiwan’s AI Stock Boom Triggers Funding Squeeze, Puts Central Bank Policy in Focus

The global AI boom has lifted AI-related shares in Taiwan and fueled a surge in investor demand for margin financing, tightening financial-market liquidity. The Central Bank of the Republic of China (Taiwan) also undersubscribed an issuance of 364-day certificates of deposit for the first time in four years, signaling an imbalance between the supply of and demand for funds. The central bank’s policy direction is therefore increasingly affecting equities and short-term interest rates.

In the first half of this year, the central bank injected funds through open-market operations, driving the outstanding balance of its certificates of deposit down by more than NT$1 trillion. Funding conditions have recently reversed again, pushing up rates at certificate-of-deposit auctions. Markets are watching the central bank’s June board meeting for signs that it may further adjust the scale of its operations to ease the funding squeeze.