The potential appreciation of the Chinese yuan in the face of mounting international pressure is expected to have a considerable negative impact on China-based Taiwanese companies manufacturing downstream technology products and technology components this year, Morgan Stanley said yesterday.
"We do not expect the potential Chinese yuan appreciation to affect Taiwan's investment and exports skewed to China [in the future]," Morgan Stanley analyst Dickson Ho (何資文) said.
Taiwan would remain a heavy investor in China, Ho said, citing data that Taiwanese companies have invested over US$40 billion in the country over the past 15 years. China now accounts for over 30 percent of Taiwan's exports.
China has seen strong pressure from its trading partners urging the appreciation of its currency, which has been pegged to the US dollar at 8.277 since 1995.
If the Chinese authorities should let its currency appreciate, Taiwan-ese companies who manufacture high-tech downstream products like notebook computers and high-tech components in China would be the two sectors seeing the highest negative impact, Ho said.
"Every 1 percent appreciation of the yuan dilutes this year's net profit [of both players in these two sectors] by 0.5 percent," he said.
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