Taiwan dollar advances on China ties

China's President Hu Jintao said the country will strive to make progress this year on a proposed cross-straits economic agreement, Lien Chan, head of a Taiwanese delegation to the Asia Pacific Economic Cooperation forum said in Singapore over the weekend. Taiwan aims to sign deals with China, the island's biggest trading partner, on tariff reduction and cross-border investments.

“There's a trend for funds to flow in,” said Yang Kung-yi, a currency trader at Shanghai Commercial & Savings Bank in Taipei. “The currency market is taking cues from stocks.”

The local dollar climbed 0.4 percent to NT$32.198 against its U.S. counterpart at 4 p.m. local time, according to Taipei Forex Inc.

The TAIEX stock index climbed 1.7 percent as Chunghwa Picture Tubes Ltd. and Hannstar Display Corp. rose on speculation they may be acquisition targets after the merger of Innolux Display Corp. and Chi Mei Optoelectronics Corp. announced on Nov. 14. Global investors bought $12.7 billion more Taiwan shares than they sold this year, helping lift the TAIEX 70 percent.

China and Taiwan are also poised to sign an agreement giving their banks, insurers and brokerages wider access to each other's markets. The signing won't be later than Taiwan's county elections that are scheduled for Dec. 5, Sean Chen, head of the island's financial regulator, told lawmakers today.

Improving Growth

Taiwan's relations with China have improved since President Ma Ying-jeou took office in May 2008 and dropped the pro-independence stance of his predecessor, Chen Shui-bian. Closer ties with Taiwan's biggest trading partner may help Ma hasten a recovery in the export-dependent economy, which shrank 7.5 percent in the second quarter.

Ten-year government bonds fell for a second day as stock gains prompted investors to trim holdings of fixed-income securities.

Taiwan's gross domestic product may climb in the October-December period after declining for five quarters, the statistics bureau said in August. The bureau is scheduled to release economic estimates on Nov. 26.

“Stocks are affecting bonds,” said Ray Cheng, a debt trader at SinoPac Securities Corp. in Taipei. “People are demanding higher yields also because of expected economic recovery.”

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