The Taiwan dollar (TWD) has been supported so far in April by the weak US dollar and exporter conversion.
Equity inflows, which have slowed so far in Q2, rebounded strongly on 23 April as foreign investors net bought over USD 720mn of Taiwan equities.
Taiwan stocks were buoyed by news that the authorities are studying a Shanghai-Taipei Stock Connect programme, which will likely lead to greater equity inflows from China to Taiwan. As a result the TWD should remain buoyed near-term as investors seek to position for this while taking advantage of the relative undervaluation of Taiwan equities.
However, caution is warranted until we have more details of the programme. Additionally, FX policy remains a concern given the high TWD valuation and recent weak trade data.
