NT dollar, TAIEX rise on inflows

The New Taiwan dollar rose to its highest in four-and-a-half years as the nation's benchmark stock index climbed to a 10-month high.

The local currency has risen 2.5 percent against its US counterpart in the past month, as global investors put NT$113.8 billion (US$3.67 billion) into Taiwan's equities last month, according to the Taiwan Stock Exchange Corp's statistics.

Foreign investors bought a net NT$13.79 billion yesterday as the TAIEX rose to its highest close since April 29 last year.

The benchmark index finished up 51.86 points, or 0.8 percent, at 6,259.69. Advancers outnumbered decliners 481 to 423 with 87 stocks unchanged.

Turnover totaled NT$103.47 billion (US$3.32 billion), compared with NT$120.95 billion on Friday. The market was closed on Monday for a public holiday.

"With the stock market increases today, people expect more fund inflows" to support the currency, said Gary Huang, a foreign-exchange trader at Union Bank of Taiwan (聯邦銀行).

The NT dollar rose NT$0.13 to close at NT$31.045, the strongest close since July 21, 2000, according to Taipei Forex Inc.

In the past five years, the NT dollar and the TAIEX have had a correlation of 0.80. A reading of 1 would mean the two moved in lock step.

A gain in the local dollar was limited to NT$31.03, the highest intraday level since July 25, 2000, on speculation the central bank sold the currency to protect the nation's exports, which account for about half of the economy.

"The authorities may want to stop the gain at around NT$31," said Jerry Ho, a foreign-exchange trader at International Bank of Taipei (台北商銀).

George Chou (周阿定), director general of the central bank's foreign-exchange department, wasn't available to comment.

On the local bourse, construction stocks were among the day's strongest performers, with their subindex closing 3.7 percent higher at 171.59.

Stanley Chou, an analyst at Barits International Securities (倍利證券), said the sector rose on expectations the stronger local currency will spur demand in the domestic housing market.

Strength in the NT dollar raises the asset value of Taiwanese companies that have a lot of domestic investments, such as in property, Chou said.

Shares in Hung Sheng Construction Ltd (宏盛建設) rose by the 7 percent daily maximum to NT$16.05 and Huaku Construction Co (華固建設) gained 6.0 percent to NT$40.70.

Petrochemical stocks were also among the biggest gainers on the stock market as oil prices remain high.

Formosa Petrochemical Corp (台塑石化) closed 4.6 percent higher at NT$64.30 and Formosa Plastics Corp (台塑) gained 3.9 percent to NT$59.20.