UBS said that Asian central banks, including in Japan, South Korea and Taiwan, will sell their currencies for the next year to spur exports and maintain economic growth amid a slowdown in China and the US.
Asia's economic gains will "peak by the second half of the year, driven by a coordinated growth deceleration in China, Japan and the US," Jonathan Anderson, a Hong Kong-based chief economist at UBS, wrote in a research note. "We expect central banks to keep up the pace of large-scale" sales.
Relying on currency sales would extend a policy that Japan, Singapore and South Korea used last year to try to lure overseas buyers. For Japan, it would mean resuming sales after a break.
The central bank hasn't sold yen since March 16 as the nation's economy grew, following record sales of ?15.2 trillion (US$136.8 billion) earlier in the year.
Japan is probably the least likely to sell currency "at the pace it's done in the past," said Ashley Davies, a currency strategist at UBS in Singapore, in an interview. "That's simply because the economy is improving. They can tolerate a bit of yen strength. We look for continued strong intervention by Korea. The domestic economy is still relatively weak."
Asian central banks will resort to sales again after US Federal Reserve chairman Alan Greenspan signaled the Fed is ready to raise interest rates, threatening to slow economic growth in the world's biggest consumer of Asian exports, Anderson wrote.
China -- South Korea and Taiwan's biggest export market -- is also trying to slow growth to 7 percent this year from an expansion of 9.8 percent in the first quarter.
Choi Joong Kyung, director-general of the South Korean finance ministry's international finance bureau, said on April 2 that the central bank had conducted a "smoothing operation." The central bank buys or sells the won at the instruction of the ministry.
Central banks may be able to slow gains, though they won't be able to thwart a rally in the currencies, UBS said. It didn't specify which central banks in the region are most likely to sell.
UBS recommended buying the Japanese yen, Singapore dollar and New Taiwan dollar because overseas investors had become net buyers of Asian stocks, wrote Bhanu Baweja, a Singapore-based currency strategist.
"Strong foreigners' selling of Asian equities has now subsided and given way to a modest net buying of Asian stocks," the report said.
UBS said it is sticking with its forecast that the yen will appreciate to 100 per dollar at the end of the year.
Fund managers from outside Asia purchased a net ?186 billion in Japanese shares in the two weeks ending June 2, after being net sellers in the previous two weeks, according to Tokyo Stock Exchange figures. Such investors were also net stock buyers in Taiwan last week after they sold more equities than they bought a week earlier.
UBS cut its forecast for gains in the Indonesian rupiah this year on concern the country's presidential election on July 5 will deter some investors.
The rupiah may trade at 8,800 against the dollar at the end of the year, versus a previous projection of 8,200, from today's 9,388, UBS said.
SECOND-RATE: Models distilled from US products do not perform the same as the original and undo measures that ensure the systems are neutral, the US’ cable said The US Department of State has ordered a global push to bring attention to what it said are widespread efforts by Chinese companies, including artificial intelligence (AI) start-up DeepSeek (深度求索), to steal intellectual property from US AI labs, according to a diplomatic cable. The cable, dated Friday and sent to diplomatic and consular posts around the world, instructs diplomatic staff to speak to their foreign counterparts about “concerns over adversaries’ extraction and distillation of US AI models.” Distillation is the process of training smaller AI models using output from larger, more expensive ones to lower the costs of training a powerful new
Singapore-based ride-hailing and delivery giant Grab Holdings’ planned acquisition of Foodpanda’s Taiwan operations has yet to enter the formal review stage, as regulators await supplementary documents, the Fair Trade Commission (FTC) said yesterday. Acting FTC Chairman Chen Chih-min (陳志民) told the legislature’s Economics Committee that although Grab submitted its application on March 27, the case has not been officially accepted because required materials remain incomplete. Once the filing is finalized, the FTC would launch a formal probe into the deal, focusing on issues such as cross-shareholding and potential restrictions on market competition, Chen told lawmakers. Grab last month announced that it would acquire
Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) have repeatedly hit new highs, but an equity analyst said the stock’s valuation remains within a reasonable range and any pullback would likely be technical. The contract chipmaker’s historical price-to-earnings (P/E) ratio has ranged between 20 and 30, Cathay Futures Consultant Co (國泰證期) analyst Tsai Ming-han (蔡明翰) told Central News Agency. With market consensus projecting that TSMC would post earnings per share of about NT$100 (US$3.17) this year, supported by strong global demand for artificial intelligence (AI) applications, and the stock currently trading at a P/E ratio of below 25, Tsai said the valuation
The artificial intelligence (AI) boom has triggered a seismic reshuffling of global equity markets, with Taiwan and South Korea muscling past European nations one by one. With its stock market now valued at nearly US$4.3 trillion, Taiwan surpassed the UK, Europe’s biggest market, earlier this month, data compiled by Bloomberg showed. South Korea is about US$140 billion away from doing the same. The tech-heavy Asian markets have shot past Germany and France in the past seven months. The shift is largely down to massive gains in shares of three companies that provide essential hardware for AI: Taiwan Semiconductor Manufacturing Co (TSMC, 台積電),
RSS