Taiwan’s Stocks Rally to 15-Year High on Bond Shift Speculation

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Taiwan’s stocks surged to the highest level in 15 years amid speculation foreign investors will shift to equities from bonds and optimism the island will broaden access to China’s capital markets.

The benchmark Taiex index climbed 1.2 percent to 9,913.28 at the close in Taipei, after earlier reaching 9,961.31, the highest level since April 2000. Taiwan Semiconductor Manufacturing Co. surged 3.7 percent, sending a gauge of chip stocks to the biggest gain among industry groups. Taiwan’s dollar rose to a five-month high as global funds bought $737 million more shares than they sold Thursday.

Taiwan introduced limits on foreign investment in the corporate bond market Tuesday, a move analysts said is aimed at curbing inflows that have pushed up the currency. Foreigners plowed $70 billion into the island in the first quarter, even with existing caps on purchases of government notes, money-market instruments and derivatives.

“There is some speculation that foreign investors will move cash to the equity market from the debt market,” said Andrew Tsai, an economist at KGI Securities Co. in Taipei. “The rally is supported by speculation of a Shanghai-Taiwan stock connect and fund inflows betting on the Taiwanese dollar’s appreciation.”

The Vice Chairman of the China Securities Regulatory Commission said this week China is studying an equities link for Shanghai and Taiwan, the Taipei-based Economic Daily News reported on April 22. When asked about the plans, the island’s top regulator said no study was underway on Taiwan’s part without ruling out the possibility.

Debt Cap

Taiwan’s Financial Supervisory Commission will cap overseas investors’ holdings of company debt and bank debentures at 30 percent of their Taiwanese securities from Wednesday, according to a document sent to lenders and obtained by Bloomberg News Tuesday. Previously, there was no limit.

Cross-strait negotiators agreed on extending a program for investing offshore yuan deposits back into Chinese securities, known as the Renminbi Qualified Foreign Instutional Investors program, to Taiwan in 2013. The RQFII quota is pending passage of a controversial cross-strait trade agreement through Taiwan’s legislature.

The Taiex semiconductor gauge rose 2.8 percent, the biggest gain since Dec. 18. MediaTek Inc. rallied 4 percent. The Nasdaq Composite Index topped its dot-com era high Thursday as U.S. shares shrugged off mixed earnings and weak factory reports.

The local dollar strengthened 0.7 percent today and 0.8 percent this week to NT$30.908 against the greenback, the strongest level since Nov. 27, Taipei Forex Inc. prices show.

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