Taiwan Dollar Jumps Most Since 2013 as Taiex Climbs to 10,000

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Taiwan’s dollar jumped the most in almost two years and the island’s benchmark stock index exceeded 10,000 for the first time since 2000 as the possibility of an equities link with Shanghai triggered a surge in demand for local shares.

The Taiex has rallied 4.6 percent since Economic Daily News reported April 22 that the Chinese securities regulator’s vice chairman Jiang Yang said it was studying a trading link between the Shanghai and Taipei bourses. Global funds bought $704 million more Taiwanese shares than they sold on Monday, preliminary exchange data show. Net purchases were $2.6 billion last week, the biggest since 2007.

“The inflows all really started last week, when there was news about the Shanghai stock connect,” said Eddie Cheung, a foreign-exchange strategist at Standard Chartered Plc in Hong Kong. “A lot of this is pre-positioning. Taiwan equities are also relatively undervalued.”

The local dollar climbed 0.6 percent, the most since July 2013, to close at NT$30.861 against the greenback, Taipei Forex Inc. prices show. It jumped as high as NT$30.551 earlier, the strongest level in five months. The Taiex index touched 10,002.58 intraday before closing 0.6 percent higher at 9,973.12.

Hong Kong’s Hang Seng Index has surged about 18 percent since a trading link with Shanghai started in November, as Chinese investors piled in to take advantage of dual-listed firms’ discount in Hong Kong. The Hang Seng China Enterprises Index, which tracks shares of mainland companies listed in Hong Kong, is the world’s best-performing benchmark stock gauge of the past month with a 24 percent advance.

‘Excessive Optimism’

Taiwan’s Financial Supervisory Commission Minister Tseng Ming-chung said last week a stock link with China isn’t on the table. The regulator imposed a new cap on foreign investors’ holdings of Taiwanese corporate bonds to 30 percent of their local securities holdings on April 22. That matches a similar restriction previously introduced for government notes, money-market instruments and derivatives.

“I’m slightly worried there may be excessive optimism over Taipei-Shanghai Stock Connect,” Cheung said. “That corporate bond limit is another sign that the authorities are concerned about currency speculation or excessive strength in Taiwan’s dollar.”

The currency has appreciated 3.5 percent this year in Asia’s best performance, a move that may damage the competitiveness of local exporters, which compete mainly with companies in South Korea and Japan.

The central bank has sold Taiwan’s dollar near the market close on most days since March 2012, according to traders who asked not to be identified. In a sign of increased intervention, the currency weakened 0.9 percent in the last 45 minutes of trading on Monday, compared with an average 0.2 percent in the same period over the past year.

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