At Any Rate TWD / Asian FX gains and equity implications
May 9, 2025
Jemmy Huang, a senior coverage analyst focused on Taiwan's financial sector, teams up with Mixo Das, an Asia equity and quant strategist, to dissect the recent 6% drop in the Taiwan dollar and its impact on regional markets. They explore Taiwan's life insurers' FX strategies amid currency volatility and the implications for equity prices in tech sectors. The duo examines cautious investor sentiments post-DeepSeek and compares Taiwan's and Korea’s equity resilience, while offering insights into emerging markets and the changing dynamics of APAC bonds.
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Taiwan Dollar Shock and Market Impact
- The Taiwan dollar's 6% daily appreciation shocked Asian FX markets causing broad regional currency strengthening.
- Lower oil prices and stronger FX exerted disinflationary pressures, leading to falling Asian bond yields.
Taiwan Lifers' FX Holdings and Sell-off
- Taiwan life insurers hold ~$770 billion overseas, 90% in USD bonds, only 30% naturally FX hedged.
- Their sharp FX losses were less due to lifers and more from retail and corporate dollar selling.
FX Damage vs Lifer Resilience
- A 10% Taiwan dollar rise can cause lifers to lose 15–20% of four years' earnings on FX-exposed assets.
- Despite losses, lifers continue investing due to ongoing inflows; margin calls are unlikely now.