Taiwan Stocks Rally but Hot Money Flees; Taiwan Dollar Falls with 2nd Largest Volume Ever

(Central News Agency, reporter Pan Ziyu, Taipei, 9th) After experiencing 'Black Monday', Taiwan's stock market sounded the charge for a counterattack today, surging 1,201.66 points. However, hot money continued to flow out, and the Taiwan dollar depreciated with massive volume, closing at NT$31.618. Although this was only a slight depreciation of 3.8 fen, the total transaction volume in the Taipei and Yuanta foreign exchange markets exploded to a staggering USD 4.746 billion, setting the second-highest trading volume record in history.

Driven by a rebound in US tech stocks, Taiwan's stock market saw a strong counterattack from heavyweight stocks, optical, and passive component groups, eventually closing up 1,201.66 points at 44,704.44 points.

Although the Taiwan stock market quickly shook off its gloom, foreign capital continued to adjust its positions today. After slashing NT$93.851 billion from Taiwan stocks yesterday, it cut another NT$91.733 billion today, marking a fourth consecutive day of selling, with cumulative withdrawals exceeding NT$340 billion.

With hot money fleeing in large numbers, the depreciation of the Taiwan dollar exchange rate was difficult to stop. Opening at NT$31.56, the exchange rate quickly turned downward, hitting an intraday low of NT$31.664 before closing at NT$31.618, continuing to hit a new low in over half a month.

A foreign exchange trader stated directly that today, not only were foreign investors frantically remitting funds out, but exporters were also actively selling foreign exchange. The simultaneous emergence of two-way forces significantly amplified the trading volume in the forex market. Seeing the massive outflow of hot money, the central bank also strengthened its defense to avoid excessive volatility in the forex market.

Although the depreciation of the Taiwan dollar was not large, there has indeed been a shift in market sentiment. The foreign exchange trader analyzed that since the beginning of this year, the Taiwan stock market has benefited from the AI boom, frequently hitting new highs with astonishing momentum. During this period, there were occasional pullbacks due to market concerns about overheating and bubbles. However, with the recent turmoil in the Middle East, US inflation data exceeding expectations, and employment data showing resilience, investors generally expect the Federal Reserve (Fed) to delay rate cuts, and cannot even rule out the possibility of a rate hike.

The foreign exchange trader further pointed out that the external situation is full of uncertainty. With the Fed's interest rate decision meeting next week, the market is highly focused on whether the Fed will release signals of a monetary policy shift. Until then, foreign investors are turning more conservative. Even though the Taiwan stock market has rebounded, they still tend to adjust their positions and lock in profits.

Today, the Taiwan dollar forex market saw a massive volume of USD 4.746 billion, the second-highest trading volume in history, second only to USD 5.561 billion on March 24, 2008. The background at that time was Ma Ying-jeou's election as president, which triggered a celebration rally in both stocks and forex.

A central bank official had previously pointed out that as the Taiwan stock index frequently hits new highs, a single share of TSMC stock, which might have cost around NT$800,000 previously, now starts at several million NT dollars. The capital required for a single stock has significantly increased, meaning the scale of transactions has expanded markedly, leading to a more significant impact of foreign capital inflows and outflows on the forex market. 'With such high amounts, the challenges will be greater.'

Observing the future trend of the Taiwan dollar, the foreign exchange trader believes that the strong rebound of the Taiwan stock market means investor sentiment is no longer pessimistic. However, before the Fed meeting, foreign capital is expected to maintain a cautious attitude, and the possibility of a bias towards remitting funds out, adding to depreciation pressure, cannot be ruled out. Nevertheless, Taiwan's high-tech industry benefits from the AI dividend, and the selling pressure from exporters should not be underestimated. Under the tug-of-war between these two forces, the Taiwan dollar is expected to show a weak, range-bound pattern in the short term. (Editor: Yang Kaixiang) 1150609