Taiwan Dollar Advances Most in Five Years as Stock Inflows Surge

  • Global funds poured $5.4 billion into island’s shares in July
  • Taiwan company earnings good, currency stable, analyst says

Taiwan’s dollar rose the most in five years as overseas investors added to their holdings of local stocks, after pouring in the most money since 2007 last month as the outlook for the island’s technology industry improved.

Global funds bought a net NT$12.8 billion ($405.96 million) of the island’s equities on Monday, following $5.4 billion of purchases in July that were the most among nine Asian markets tracked by Bloomberg. The inflows helped drive the benchmark Taiex index to a one-year high.

The Taiwan dollar rallied 0.9 percent against the greenback, the most since January 2011, to close at NT$31.64, Taipei Forex Inc. prices show. The Taiex surged 1.1 percent. A gauge of the U.S. dollar’s strength tumbled 1.3 percent on Friday.

Some of the island’s largest listed firms including Taiwan Semiconductor Manufacturing Co. have reported second-quarter earnings that beat estimates, easing concern that slower global smartphone growth would crimp profits. Apple Inc., which counts many Taiwanese technology giants as its suppliers, jumped 9 percent last month after the firm reported second-quarter sales that dropped less than projected.

"Within emerging markets, Taiwan’s earnings are relatively good and the currency is relatively stable," said Peter Tzeng, senior vice president at IBTS Investment Consulting Co. in Taipei. "The whole mobile supply chain is slowing, but companies with a monopoly or a technological edge like TSMC or Largan Precision Co. are still quite steady."

Low Volatility

A large current-account surplus and central bank management make Taiwan’s dollar steadier than its emerging-market peers. Its one-year implied volatility of 6.45 percent, a measure used to price options, is the fourth lowest among developing-nation currencies. The Taiex is also appealing for its dividend yield, Tzeng said. The measure stands at 3.98 percent for the island, the highest in Asia after Australia.

"The Taiwan dollar was supported by a weaker U.S. dollar on Friday, and the news that global investors net bought Taiwan equities also supported sentiment in the currency market,” said Eddie Cheung, a currency strategist at Standard Chartered Plc in Hong Kong. “In the medium to long term, we don’t think Taiwan’s fundamental data are very strong, and the central bank may cut rates to support growth, so there’s room for the currency to depreciate."

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