Taiwan Just Pulled a Surprise Move That Could Rattle Global Investors

Yahoo

05-07-2025

Taiwan just fired another shot in the battle to slow its surging currencyand global investors may soon feel the ripple. The central bank is considering a rule that would force foreign funds to show proof of stock orders before converting into the Taiwan dollar, adding a 1-day delay to their currency settlement. That's a major change from the current setup, where investors can freely swap currencies on the same day they place tradesno questions asked. Officials say the rule, if adopted, would apply only to foreign institutions with weak inflow controls, not everyone.
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So why now? The Taiwan dollar has climbed nearly 14% against the greenback this year, putting pressure on the island's exporters and financial firms. In response, policymakers have rolled out a steady stream of defensive plays: asking foreign ETF investors to unwind currency bets, nudging local banks to delay dollar sales, and even forming a task force to help smaller businesses deal with the fallout. This new proposal could be the most direct attempt yet to limit speculative inflows driving up the currencythough it also introduces a new friction for foreign equity trades.
Markets are already reacting. The implied gain on the Taiwan dollar via offshore forwards dropped, and the currency edged down about 0.2%. A meeting with custodian banks is set for next week. But if this rule goes live, it could reshape how funds manage positions in Taiwanese equities, from chip giants like Taiwan Semiconductor Manufacturing (NYSE:TSM) to global leading EV like Tesla (NASDAQ:TSLA) that have indirect exposure. Delayed settlement could mean higher risk, more complexityand less appetite for fast-money flows into one of Asia's hottest markets this year.
This article first appeared on GuruFocus.