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Taiwan’s BLF funds hit as global supply chain woes, rate hikes slam markets

By Hui Ching-hoo   
June 7, 2022

Taiwan pension funds overseen by the Bureau of Labor Funds (BLF) reported a NT$215 billion (US$7.31 billion) investment loss in the first four months of the year as markets are roiled by global supply chain disruptions which are worsening inflationary pressures, and central banks hike interest rates to rein in soaring prices.

The eight BLF pension and annuity funds swung to an average investment loss of 3.92% in January through April from a 6.05% gain in the same period of 2021, when they posted an investment gain of NT$297.3 billion.

The BLF pointed to the Russia-Ukraine war and China’s zero-Covid policy to battle the Omicron variant of the coronavirus as key factors for the supply chain issues, which are causing widespread shortages of goods and raw materials and driving up energy, food and other costs.

As central banks struggle to control skyrocketing consumer prices with rate hikes, there is growing concern of another global recession just as the world is beginning to recover from the coronavirus crisis.

The BLF says rising inflation and tighter monetary policies of major central banks are adding pressure on corporate earnings and battering global stock markets.

The MSCI All-Country World Equity Index plunged 12.94% in the four months to April. In Taiwan, the benchmark stock index shed 8.93% over the same period.

“The increasing volatility of global financial markets this year has posed a tougher challenge for asset allocation. BLF is working hard to grasp the current global political and economic trend and bolster risk controls in order to mitigate the impact,” the BLF says in a statement on June 2.

The eight BLF funds had NT$5.39 trillion of total assets as of April 2022, up from NT$4.78 trillion a year ago, primarily from member contributions.

The Labor Retirement Fund, Taiwan’s largest defined-benefit retirement scheme, was the worst performer with an average investment loss of 4.57%, followed by the Labor Insurance Fund, which lost 4.11%.