Bloomberg News

Taiwan Dollar Extends Rebound on Inflows; Five-Year Bonds Gain

November 29, 2011

Nov. 29 (Bloomberg) -- Taiwan’s dollar strengthened, extending its rebound from a six-week low, after overseas investors boosted their holdings of the island’s shares. The government’s five-year bonds rose, pushing yields down from the highest level in almost a month.

Global funds bought $141 million more Taiwanese stocks than they sold in the past two days, ending an eight-day run of net sales in which $1.9 billion was pulled from the local market, exchange data show. Taiwan’s five-year debt, the most-traded securities today, rallied on speculation foreigners are adding to their holdings.

“There’s a high positive correlation between five-year bonds and the stock index performance as they’re the assets foreigners like to hold,” said Albert Lee, a Taipei-based fixed-income trader at Cathay United Bank Co. “Now the stock market has stabilized and there’s money flowing back into Taiwan shares. That’s fueled a five-year bond rally.”

The Taiwan dollar rose 0.1 percent to NT$30.412 against its U.S. counterpart, according to Taipei Forex Inc. That’s the biggest gain since Nov. 11. The currency reached NT$30.505 on Nov. 25, the weakest level since Oct. 12. The benchmark share index climbed 1.3 percent today, following a 1.7 percent gain yesterday.

The yield on the 2 percent bonds due July 2016 dropped one basis point, or 0.01 percentage point, to 1.04 percent, prices from Gretai Securities Market show. Volumes have fallen as traders avoid taking risks toward the end of the year, Lee said.

The overnight money-market rate, which measures interbank funding availability, was little changed at 0.398 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

--Editors: James Regan, Ven Ram

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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