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Cyclical Headwinds Persist For TWD

TWD

USD/TWD hasn't been able to meaningfully break above 31.40 this week. The pair sits just below this level (31.38 last). Dips should still be supported in the current macro backdrop, with 31.25 a potential first support zone, followed by 31.05/15.

  • Taiwan equities are higher today, but the broader backdrop for global tech sentiment still appears challenging. The chart below overlays the SOX ETF versus the US real 10yr yield, which is inverted on the chart.
  • Broadly tighter policy settings, coupled with signs of softening global demand, continue to weigh on the outlook.
  • We continue to see offshore investors selling down local share holdings. Yesterday saw a further -$253mn, bringing September to date net outflows to -$3.4bn.
  • Bloomberg also notes sharp outflows from the emerging market ETF in September so far. The second and third highest weights in this ETF are internet and semiconductors (after banks).
  • Note coming up later today is Taiwan export orders, which will be in focus given signs of slower export growth (the last print was -1.9%, +1.1% expected for August).
  • The CBC meets on Thursday with a 12.5bps hike expected (taking the policy rate to 1.625%).

Fig 1: SOX ETF & US Real Yield (10yr)

Source: MNI - Market News/Bloomberg

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