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The Taiwanese dollar is expected to benefit further from continued capital inflows including 1) equity investment; 2) more investment by local firms returning from mainland China amid the trade disputes and; 3) increasing remittances due to the passage/implementation of the Act on the Use and Taxation on the Inward Remittance of Overseas Fund, according to the latest research report from Scotiabank.
It was reported that Taiwan Semiconductor Manufacturing Co (TSMC) last Thursday (October 17) raised its capital spending by up to 40 percent for this year to USD15 billion and said it would maintain the record-high budget next year.
It could prompt foreign investors to pour more funds into local equity markets and boost the TWD afterwards. In addition, Taipei Times reported Tuesday that the Investment Commission said on Monday that government-approved foreign direct investment (FDI) rose 9.37 percent y/y to USD7.88 billion in the first nine months of this year amid the US-China trade dispute, the report added.
More investment relocation will see a rebound in Taiwan’s bank loans extended to private enterprises, boost the economic growth afterwards. The Chung-Hua Institution for Economic Research (CIER) last Friday raised its forecast for Taiwan’s GDP growth this year from the July prediction of 2.06 percent to 2.33 percent on higher-than-expected investment growth.
In addition, with insurance investment in bond ETFs breaching the TWD1 trillion mark, Taiwan’s Financial Supervisory Commission (FSC) will offer new cooling measures in the near term according to local media.
The risk factor of insurance investment in bond ETFs will be readjusted together with an extra currency-risk capital charge of 6.61 percent. It has prompted local lifers to raise the hedging ratios for their overseas assets, imposing downward pressure on USD/TWD DF and NDF points.
Meanwhile, according to the latest statistics of the FSC, the size of the domestic bond ETFs climbed to TWD1,043.9 billion as at end-August. Insurance investment in the bond ETFs reached TWD1,001.6 billion, of which the life insurance held TWD996.7 billion, Scotiabank further noted in the report.
