Exchange rates worry exporters

The strengthening New Taiwan dollar is prompting the nation's export-oriented electronics makers to take aggressive steps to hedge against exchange-rate losses, but no serious profit erosion is expected soon, analysts said yesterday.

Motherboard, notebook computer and printed-circuit-board makers will suffer the most if the currency rises above NT$33 to the US dollar in the current quarter, said Maddux Lin (林承義), an assistant manager at Grand Cathay Securities Co (大華證券).

These original-equipment manufacturing (OEM) companies export 80 percent to 90 percent of their products, which are mostly priced in US dollars, Lin said.

"But I don't expect a serious impact soon as they have been used to handling currency fluctuations in recent years," he said.

The New Taiwan dollar rose by NT$0.02 to NT$33.129 against its US counterpart yesterday. Turnover was US$1.4 billion. The NT dollar has risen 2.5 percent since early last month.

The NT dollar is likely to strengthen to NT$33 in the first quarter, if other Asian currencies continue to strengthen against the greenback, said Yang Kung-yi (楊恭逸), a currency trader at Shanghai Commercial and Saving Bank (上海銀行).

Compal Electronics Inc (仁寶), the world's No.2 notebook computer maker, said it was difficult to gauge how big its losses will be, but that it had already taken steps to reduce the impact, spokesman Gary Lu (呂清雄) told investors on Wednesday.

"It is certain there will be some loss as the NT dollar has appreciated by 2.5 percent" this quarter, Lu said.

Chi Mei Optoelectronics Corp (奇美電子), the nation's second-largest flat-panel maker, said last week that it was taking steps to hedge against exchange losses.

With hedging measures in place, said Charles Ma (馬嘉禾), an analyst at Yuanta Core Pacific Securities (元大京華), "I don't worry too much about the higher local currency hurting the profits of Taiwanese electronics companies."

The appreciation of the NT dollar is less steep than for the South Korean won and Japanese yen, which will enhance the competitiveness of local electronics companies, Ma said.

"The exchange rate issue will not weigh on the electronics sector's share prices," he added.

Alex Wu (吳興國), an analyst at KGI Securities Co (中信證券), however, worried about how much exchange rate losses will eat into companies' first-quarter profits.

"The loss will be significant, but we haven't come up a final forecast yet," Wu said.