TWD likely to prop up in weeks ahead, together with early signs of stabilization: Scotiabank

The TWD is expected to prop up in weeks ahead owing to renewed equity inflows and continued repatriation of investment, together with early signs of stabilizing and improving coronavirus situation in China, according to the latest research report from Scotiabank.

Foreign investors will return to Taiwan’s equity markets amid accommodative external liquidity and strong demand for 5G network development worldwide this year, after pulling out a net USD 1.79bn of funds from local stock markets year-to-date.

When risk aversion subsides, high dividend yields will make Taiwan stocks attractive to global investors again in a low interest rate environment. Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, on Monday reported that its revenue topped TWD100 billion (USD3.33 billion) for a sixth straight month in January, according to the Taipei Times newspaper.

The company last week said it was sticking to its Q1 revenue forecast of USD10.2-10.3 billion on strong demand for 5G smartphones and expectations for a minimal impact of the coronavirus outbreak, the report added.

In addition, continued investment by local firms can be seen returning from mainland China on concerns over their supply chain bracing for disruption from the coronavirus outbreak, even though the phase-one US-China trade deal has been reached and signed.

According to Taiwan’s official data, the repatriation of investment by Taiwanese firms with operations in mainland China amounted to TWD716.0 billion as of February 6. BoT Governor Veerathai Santiprabhob said last Thursday that the central bank is ready for additional appropriate measures against speculation on the baht that would significantly affect Thailand’s economic stability.

He also said that the central bank is ready for further relaxation of rules on overseas portfolio investment as the baht is still out of line with economic fundamentals despite recent weakness. Meanwhile, one day earlier, the BoT voted to lower the policy rate by 25 bp to 1.00 percent in a unanimous decision, the third cut in the last five meetings, Scotiabank further noted in the report.