Taiwan dollar, stocks fall on intervention risk

Taiwan has seen a decline in the amount of speculative capital from overseas sitting in the island's banks, Central Bank of the Republic of China (Taiwan) Governor Perng Fai-nan said yesterday, more than a week after the island's financial regulator banned foreigners from placing funds in time deposits. The bank bought the greenback on Nov. 17, after the island's dollar rose to the highest level in more than a month, according to two traders familiar with the bank's operations.

Taiwan's TAIEX index fell 77.01, or 1 percent, to 7,682.97 at the close of Taipei trading. The measure added 0.2 percent for the week, its third weekly advance.

Taiwan Semiconductor Manufacturing Co., the world's largest custom-chip maker, lost 1.9 percent to NT$61.70, while United Microelectronics Corp., the world's second-largest, retreated 3.9 percent to NT$15.95, its steepest decline since Aug. 18, after Bank of America Corp.'s Merrill Lynch & Co. brokerage downgraded the global semiconductor industry outlook to “negative” from “positive,” citing rising chip supply.

Taiwan Semi was reduced to “neutral” from “buy,” while United Micro and Advanced Semiconductor Engineering Inc., the world's largest chip tester and packager, were both lowered to “underperform” from “buy.”

Advanced Semi dropped 3.9 percent, the most since Aug. 17, to NT$27.10.

Hon Hai Precision Industry Co. retreated 1.1 percent to NT$135. The world's largest contract electronics manufacturer will make an electronic reading device for China Mobile Ltd., the biggest phone carrier by market value, said in a briefing in Shenzhen yesterday.

“The central bank is upset about the currency trade,” said Eric Hsing, a fixed-income securities trader at First Securities Inc. in Taipei. “In the long term the Taiwan currency should be on an uptrend. In the shorter term, the central bank wants to lower the volatility.”

Taiwan's dollar slid 0.2 percent to NT$32.350 versus the greenback as of 4 p.m. local time, according to Taipei Forex Inc. It was little changed for the week, having retreated since reaching NT$32.029 on Nov. 17, the strongest level since Oct. 1.

The currency gained in the first two days of this week after China and Taiwan agreed on Nov. 16 to widen access to each other's financial industries. Perng said yesterday the amount of so-called hot money, or speculative capital from overseas, deposited at banks on the island had dropped to about NT$350 billion (US$11 billion) from some NT$400 billion a month earlier.

The current-account surplus narrowed to US$8.2 billion in the third quarter from US$9.9 billion in the previous three months, the central bank said today after the market closed. Economists surveyed by Bloomberg forecast an US$8.5 billion surplus.

The yield on the 1.375 percent bond maturing September 2019 was little changed today at 1.43 percent, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. Its price climbed 0.0265, or NT$26.5 per NT$100,000 face amount, to 99.4820. The yield increased one basis point, or 0.01 percentage point, this week.

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