Core Viewpoint - Taiwan's central bank will shift from biannual to quarterly disclosures of foreign exchange market interventions starting January, aiming to enhance transparency and reduce speculative activities that have led to significant fluctuations in the New Taiwan Dollar (NTD) [2][4][6]. Group 1: Central Bank's Actions - The central bank's decision to increase the frequency of disclosures is in response to pressures from the US and Europe, which have accused Taiwan of intentionally devaluing the NTD [4][6]. - The first quarterly report will cover intervention activities from July to September 2025, aligning Taiwan with international standards [4]. Group 2: Economic Context - Taiwan's economy is heavily reliant on exports, with export dependency reaching approximately 60% of its GDP, significantly higher than Japan's 20% and South Korea's 40% [6]. - TSMC's CEO noted that a 1% appreciation of the NTD results in a 0.4 percentage point decrease in operating profit margins, highlighting the sensitivity of the export-driven economy to currency fluctuations [6]. Group 3: US-Taiwan Relations - The US has expressed concerns over Taiwan's trade surplus with the US, which reached a record $64.8 billion in 2024, primarily driven by semiconductors [6][8]. - The US Treasury has warned Taiwan against targeting specific exchange rate levels and emphasized that market interventions should only be considered in response to excessive volatility [6]. Group 4: Market Perception and Predictions - The Economist magazine indicated that the NTD is undervalued by 55% against the US dollar, suggesting that Taiwan is in a "Taiwan disease" state of deliberately keeping its currency low to maintain export competitiveness [8][9]. - Taiwan's economic performance is projected to be strong in 2025, with an expected real GDP growth rate of 7.37%, the highest in 15 years, followed by a forecast of 3.54% for 2026 [9].

Core Viewpoint - The recent appreciation of the Renminbi (RMB) is seen as beneficial for domestic consumption and reducing import costs, but there are concerns about calls for a significant appreciation that could harm the economy [1][3][21] Group 1: Economic Impact of RMB Appreciation - The moderate appreciation of the RMB aligns well with the domestic strategy to expand internal demand, leading to lower import costs and increased disposable income for consumers [3][21] - China, as the world's largest crude oil importer, has seen a 3.2% year-on-year increase in crude oil imports, totaling 521.87 million tons in the first eleven months [3] - The reduction in import costs for crude oil and other commodities, such as synthetic fiber and soybeans, alleviates financial pressure on households, allowing for increased spending in sectors like tourism, education, and health [3][4] Group 2: Risks of Significant RMB Appreciation - Experts advocating for a drastic appreciation of the RMB by 50% may overlook the potential negative consequences, such as the risk of economic instability similar to Japan's experience post-Plaza Accord [4][20] - A rapid appreciation could severely impact export-oriented businesses, which typically operate on thin profit margins of 3% to 5%, potentially leading to cash flow issues and the elimination of many small and medium enterprises [17][21] - The argument for significant appreciation based on purchasing power parity is criticized for ignoring the differences in economic structures and cost compositions between countries [12][14][16]

Core Insights - Taiwanese investors have poured approximately $73 billion into U.S. bond ETFs over the past few years, but are now facing significant losses of up to 12% in May due to a combination of a strong TWD and declining U.S. bonds [1][2] - The Economist's semi-annual Big Mac Index indicates that the TWD is undervalued by 58.8% against the USD, the most significant undervaluation among 58 currencies assessed [1] Group 1: Investment Trends - Despite the warning signs, Taiwanese investors have continued to invest heavily in overseas assets, expecting the TWD to depreciate further [2] - The largest and oldest industry ETF, Yuanta 20-Year Plus U.S. Treasury ETF, has seen its market value shrink by 13% since early April, with losses since the Fed began raising interest rates amounting to nearly one-third since its inception in 2017 [2] Group 2: ETF Market Dynamics - Taiwan has a relatively large ETF market, with $196 billion in assets as of the end of 2024, accounting for 66% of total investment fund assets, equating to an average of nearly $8,400 per person in ETFs, with a significant portion in bond ETFs [3] - Regulatory attempts to curb the "Formosa bonds" market led to the development of a "Formosa ETF" ecosystem, allowing local investors to bypass holding limits while primarily investing in U.S. bonds [3] Group 3: Redemption Trends - Taiwanese investors began withdrawing funds from bond ETFs in February and March, with net outflows of $1.1 billion, indicating a trend of redemption prior to significant fluctuations in the TWD [4] - The redemption trend accelerated in April, with net redemptions reaching $817 million, up from $504 million in March and $192 million in February, resulting in total assets dropping to $7.8 billion from a peak of $9.4 billion at the end of April [4] - Despite recent losses and redemptions, the total assets in Taiwanese U.S. bond ETFs remain ten times the size from early 2019, suggesting substantial risk if further withdrawals occur [4]