Taiwan's trade surplus surged in March.......>

TAIWAN: Taiwan's trade surplus surged in March thanks to a strong recovery in

export growth. The trade balance rose to $6.0 bln, more than double the February

figure of $2.9 bln. Export growth rose to 16.7% Y/Y from -1.2% Y/Y in February

as total exports hit a record high of $30 bln.

-The data chimes with our view that Taiwan's external accounts continue to

reflect an undervalued currency, and that the central bank continues to prevent

the Taiwanese dollar from appreciating more in line with the country's

fundamentals. Foreign reserves hit a new record high of $457 bln in March

reflecting the Bank of China's efforts to stem appreciation.

-While fundamental pressures suggest further upside for the TWD, the central

banks is unlikely to allow further strength in trade-weighted terms as a global

trade slowdown, perhaps driven by increased global protectionism, would deliver

a major blow to the export-dependent economy. The major risk for the TWD comes

from a reversal in the trend of Chinese yuan strength, which would likely cause

Taiwanese policymakers to act even more aggressively to prevent currency

strength due to fears of reduced competitiveness.