Taiwan Stocks Drop From One-Year High on Currency Gain Concern

  • Local dollar’s advance spurred earnings worry, investor says
  • Foreign inflows rise to $1.57 billion for August, most in Asia

Taiwan’s stocks fell off the highest levels in more than a year amid concern a strengthening local currency will weigh on electronics exports.

Technology shares including Taiwan Semiconductor Manufacturing Co. led Thursday’s declines, with the chip supplier to Apple Inc. dropping 1.7 percent after reporting sales shrank last month. Asia’s biggest foreign inflows have propelled the island’s dollar to one-year highs, threatening the competitiveness of Taiwanese manufacturers.

The Taiex fell 0.8 percent, the most in almost two weeks, to 9,131.83, after rising on Wednesday to the highest level since early July last year. The Taiwan dollar weakened 0.3 percent to NT$31.33 against the greenback, after climbing to the strongest level since mid-2015 in the previous session. The currency has advanced 1.9 percent this month, the most in Asia.

"It’s normal for the market to take a break after the Taiex closed at around 9,200 yesterday, which is an important psychological level," said Ben Lin, a money manager at Uni-President Assets Management Corp. in Taipei. "Over the past few days, the Taiwan dollar has appreciated more, so people will start to expect that to affect third-quarter earnings for electronics companies."

Overseas funds have poured $1.57 billion into Taiwan’s equities this month, taking the year’s net inflows to $13.2 billion. That’s the most among nine Asian markets tracked by Bloomberg. Taiwan’s life insurers and pension funds may invest as much as $35 billion in equities over the next five years after regulators lowered risk weightings, according to Credit Suisse Group AG.

TSMC, the biggest contributor to Thursday’s equity decline by index points, reported a day earlier that July sales fell 5.6 percent from a year earlier. Expectations that the imminent release of Apple Inc.’s iPhone 7 will boost the profits of Taiwanese suppliers including TSMC drove the recent rally.

The Taiex’s 14-day relative strength index neared 70 on Wednesday, the level that some traders see as a signal shares are overbought. Uni-President’s Lin said his fund had taken profits on equities recently, and that it will look to buy shares that are less dependent on exports or are cheaper.

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