Hot money pours into Taiwan stocks to hit new highs, New Taiwan dollar rises above 31.8 yuan mark

Driven by TSMC, the Taiwan stock market reached a new high today, with the market index approaching the 50,000-point mark. With the influx of foreign hot money, the exchange rate of the New Taiwan dollar against the U.S. dollar also rose simultaneously, and broke through the 31.8 yuan mark in one fell swoop. It finally closed at 31.788 yuan, an appreciation of 4.2 points. The exchange rate had four consecutive reds, and the trading volume was US$2.589 billion.

The U.S. labor market has cooled, and market expectations for the Federal Reserve to raise interest rates have fallen sharply, prompting U.S. stocks to close in the red. This also led to the Taiwan stock market rising 1,236.3 points today to close at 49,712.04 points, with the three major legal entities buying more than 76.449 billion yuan in total. Among them, foreign capital bought more than 71.896 billion yuan, and hot money remittances have also become an important driving force for the rise of the New Taiwan Dollar.

The New Taiwan dollar opened at 31.81 yuan in early trading and continued to rise. It hit an intraday high of 31.74 yuan, rising by nearly 1 dime. However, oil prices and U.S. bond yields were still at high levels. The U.S. dollar index rebounded. Major Asian currencies were under pressure, which also limited the appreciation of the Taiwan dollar.

According to statistics from the central bank, as of 4 p.m., the U.S. dollar index rose 0.36%. Among the major Asian currencies, except the Korean won, which appreciated by 0.21%, and the Taiwan dollar, which appreciated by 0.13%, all other major Asian currencies depreciated. Among them, the Japanese yen depreciated by 0.04%, the Singapore dollar depreciated by 0.16%, and the RMB was closed.

Cai Jiongmin, director of the Central Bank's Foreign Exchange Bureau, pointed out that foreign investment has always been one of the important factors affecting Taiwan's foreign exchange market. In addition to foreign investment trends, the trend of the international U.S. dollar is also an important factor affecting the New Taiwan dollar. Whether exporters' U.S. dollar income is repatriated, as well as the flow of funds such as foreign investment by Chinese people and companies, will also affect the supply and demand in the foreign exchange market.

Cai also mentioned that although exporters have overseas investment needs and keep part of their US dollar income overseas, the overall sales amount this year is still higher than last year.

Talking about the market outlook of the yen, Cai Jiongmin said that whether the Japanese authorities will further raise interest rates is an important variable affecting the trend of the yen. The market also continues to pay attention to whether the Japanese government will intervene in the currency market again. In particular, if the yen falls below 160 against the US dollar, it may have an impact on import prices. When the yen reaches this price, the market will be more cautious.

However, the yen is an international currency. In addition to being affected by the monetary policies of the United States and Japan, it is also related to global capital allocation and the overseas asset allocation of Japanese investors.

As for the recent strong Korean won, Cai Jiongmin analyzed that the Korean won depreciated by nearly 6% in the first half of the year. The recent strong trend of the Korean won is related to the investment and hedging behavior of foreign capital in the Korean stock market. Some studies have pointed out that the Korean stock market rose sharply before, and the value of foreign investors holding Korean stocks increased, so they needed to increase their US dollar safe-haven positions. Later, Korean stocks retreated, and foreign investors reduced their safe-haven positions, and related operations pushed up the Korean won.

In addition, South Korea's export performance is strong, especially the growth in exports of semiconductors such as memory. In addition, the funds raised by Korean company Hynix after being listed on the US ADR were repatriated on a large scale, and the company's demand for funds such as buying back treasury shares and issuing dividends also drove US dollar funds back to South Korea, becoming a factor for the strength of the South Korean won in the second half of the year.

In comparison, the trend of the Taiwan dollar has remained roughly balanced, and the fluctuation range is not as large as that of the Korean won.