Taiwanese stocks fell and the local currency pared earlier gains on concern a financial cooperation agreement with China lacked details and will take months to implement.
The benchmark TAIEX dropped 0.76 percent to close at 7,733.21, after gaining as much as 1.1 percent earlier.
The New Taiwan dollar rose 0.2 percent to NT$32.12, after retreating from an intraday high of NT$32.029 — the highest since Oct. 1.
Taipei and Beijing on Monday signed a memorandum of understanding (MOU) on financial regulatory cooperation, agreeing on issues such as cross-strait financial supervision, information sharing and risk management.
“What the market has been expecting to see is the beef, the details on whether Taiwan companies will be allowed to enter China’s financial markets, not the principles we saw,” said Ernest Chiang (蔣尚勳), who manages the equivalent of US$62 million for IBT Asset Management Co (台灣工銀投信). “The announcement isn’t the bullish news the market has been looking forward to.”
Cathay Financial Holding Co (國泰金控) lost 2.5 percent to NT$59.40, while Chinatrust Financial Holding Co (中信金控) dropped 3.3 percent to NT$20.35.
“We do not exclude the possibility of some profit-taking once the positive sentiment subsides,” Morgan Stanley analysts led by Jesse Wang (王嘉樞) and Bruce Chou (周磊) wrote in a report yesterday.
“This is because the signing of MOUs simply represents an important first step and will not be able to change financial business profitability imminently,” they wrote.
Taiwan and China will begin talks on an economic cooperation framework agreement, or ECFA, at the next round of cross-strait talks in Taichung in the middle of next month.
“I believe people would sell into strength,” said Seow Hock Hin, senior vice president of institutional sales at MF Global Singapore Pte Ltd. “What investors were previously looking at was for banks on both sides of the [Taiwan] Strait to be able to invest in one another. They now have to wait for the ECFA, which would only happen in 2010.”
In the foreign exchange market, the NT dollar has traded within a range of NT$33.2 and NT$32 against the greenback over the past six months.
“It has finally happened, which is great, but there are two forces opposing gains,” said Craig Chan, a Singapore-based strategist at Nomura Holdings Inc. “The first is the central bank intervention and the second is capital controls. I am optimistic in the medium and long term, but in the short term, any knee-jerk gain won’t be sustained.”
Chan’s forecast was for the NT dollar to rise to NT$31.50 in six months and NT$28.50 by the end of next year.
The central bank has intervened in markets by arranging purchases of the US dollar. Foreign-exchange reserves rose by US$63 billion in the past year to US$341.2 billion, a central bank report on Nov. 5 said.
Last month’s increase of US$9 billion was the biggest this year.
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