Taiwanese life insurers' portfolios have billions of unhedged dollars
SINGAPORE, May 6 (Reuters) - Taiwan's currency is at three-year highs after notching unprecedented gains as insurance firms, pension funds and other investors quit U.S. dollar assets or scramble to hedge exposure.
Analysts estimate billions of dollars' worth of hedging or repatriation by life insurance firms could drive the Taiwan dollar even higher.
WHY IT'S IMPORTANT
The latest scramble by Taiwanese life insurers to protect their portfolios reflects an unwinding of massive U.S. dollar holdings by global investors, as U.S. President Donald Trump's chaotic trade policies shake decades of unquestionable faith that investors had in the dollar's dominance.
That means investors based in low-yielding markets such as Taiwan, who for years could count on stable and high dollar yields as well as extra return owing to depreciation in their currencies, are now re-assessing portfolios.
BY THE NUMBERS
Khoon Goh, head of Asia research at ANZ, estimates Taiwanese life insurance companies hold $682 billion of foreign assets, mostly in U.S. fixed income, though he is unsure how much of that they could be selling or bringing home.
UBS analysts say Taiwan's net international investment position, which measures the difference between its external financial assets and liabilities, is "uniquely large" at 165% of gross domestic product as compared to an average of 0% for other emerging Asian economies.
Namik Immelback, chief strategist at SEB Research, estimates that of the $700 billion in foreign assets these life insurance companies hold, only 70%, or $490 billion, is hedged.
Analysts at HSBC said as of last December, the average currency hedge ratio based on their sample of Taiwanese life insurance companies was slightly less than 60%.
The three-month U.S. dollar/Taiwan dollar non-deliverable forward – a common metric used for hedging – fell to its most negative in 17 years on Tuesday , suggesting investors are heavily betting on further appreciation for the Taiwan dollar.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
4 hours ago
- Reuters
BOJ must ensure fiscal considerations don't overtake mandate, deputy governor says
TOKYO, June 7 (Reuters) - The Bank of Japan should make clear it is not monetising government debt by ensuring that fiscal considerations do not take precedence over its goal of achieving price stability, Deputy Governor Shinichi Uchida said on Saturday. Central banks can theoretically print unlimited amounts of money and completely finance government debt, which poses delicate questions around their huge government bond purchases conducted to revive their economies, Uchida said. Central banks see "monetising," or directly financing government deficits, as taboo, as doing so risks letting inflation get out of control and potentially eroding their independence. Such unconventional monetary easing steps taken since the 2008 financial crisis present a challenge for central banks across the globe, he said in a speech. The BOJ's monetary easing, for its part, was aimed at achieving its 2% inflation target, and not at funding government debt, Uchida said. "In considering what constitutes monetary financing or not, the important question is whether monetary policy is compromised by fiscal considerations," Uchida said. In deploying and rolling back monetary easing, the BOJ must focus on achieving its economic and price mandate. "The result must be that the Bank does not deviate from such policy conduct out of fiscal considerations," he said. "In its future conduct of monetary policy, the Bank should make it clear that it is not engaging in monetary financing." The remarks come against the backdrop of growing pressure from opposition and ruling parties on Prime Minister Shigeru Ishiba to increase budget spending ahead of an upper house election due next month. Some analysts have blamed concerns over Japan's worsening finances for pushing up super-long bond yields to record highs last month, and complicating the BOJ's efforts to taper its huge bond purchases. Under a radical monetary easing programme deployed in 2013, the BOJ increased purchases of government bonds and adopted a policy of capping long-term interest rates around zero. While the BOJ ended the policy last year, its short-term policy rate is still at 0.5%. The central bank plans to lay out in June a new bond tapering plan for fiscal 2026 and beyond as part of its effort to normalise monetary policy.
Reuters
6 hours ago
- Reuters
Senior Taiwan official visits site of new Alaska LNG project
TAIPEI, June 7 (Reuters) - A senior Taiwanese official said on Saturday he had this week visited the site of a potentially enormous new liquified natural gas (LNG) project in Alaska that the Trump administration has been pushing hard to allies in Asia as a supply option. Energy developer Glenfarne had said on Tuesday that 50 firms had formally expressed interest in contracts worth more than $115 billion from its Alaska LNG project, a massive infrastructure deal championed by U.S. President Donald Trump. Writing on his Facebook page, Pan Men-an, secretary-general to Taiwan President Lai Ching-te, said he had attended an energy conference in Alaska at the invitation of U.S. Secretary of Energy Chris Wright and visited the state's North Slope. Phase One of the project is expected to deliver natural gas about 1,230 km (765 miles) from the North Slope to the Anchorage region. "Despite the freezing temperatures, we talked enthusiastically about building resilience and responsibility as democratic partners in the face of global climate change and the challenges of authoritarianism," Pan wrote. "In the face of trade challenges and international turbulence, we have no choice but to rise to the occasion," he said, without mentioning whether he had signed any deals while there. The presidential office said late on Friday that Pan had been accompanied by Fang Jeng-zen, chairman of Taiwan's state-owned energy company CPC. CPC in March signed a non-binding agreement to buy LNG and invest in the project, a move Taiwan's president has said would ensure the island's energy security. If built, the Alaska LNG project will export up to 20 million metric tons of the superchilled gas a year. It would open direct access for U.S.-made LNG to Asian markets without having to go through the Panama Canal or around the Horn of Africa, reducing transit time and costs. Taiwan has pledged to massively ramp up its purchases from the United States, including energy, to reduce a yawning trade surplus that has angered Washington.
Telegraph
6 hours ago
- Telegraph
The West tried to make North Korea a pariah – but it's never been stronger
Kim Jong-un sits captivated. Leaning forward with binoculars raised, the North Korean dictator watches tanks manoeuvring over sandy terrain and troops rappelling down from helicopters. Occasionally, he turns to one of the uniformed officers behind him to point something out or ask a question. The scene, captured on video and shared by North Korea's state media last month, offered a rare glimpse into the secretive regime's expanding military capabilities. The isolated country, known for its intensely authoritarian regime, boasts the world's fourth-largest military, with nearly 1.3 million troops. It also has 50 nuclear warheads, with plans to build 150 more by 2027. A recent assessment from the US department of defence found North Korea had reached its 'strongest strategic position' in decades. 'North Korea has never been as strong – strong militarily as well as strong in oppressing its civilian population – as it is right now,' said Joanna Hosaniak, deputy director general of the Citizens' Alliance for North Korean Human Rights. This is, in part, thanks to a new mutual defence treaty signed between North Korea and Russia in November last year. But it is also down to its increasing ability to source foreign income through hacking and forced labour, despite Western sanctions, as it wages an information war against its enemies and its own population. Taken together, these three factors are allowing North Korea quietly to transform itself. Shopping for an upgrade Since striking a deal with Russia, North Korea has supplied Moscow with 15,000 soldiers, 100 ballistic missiles and millions of munitions to help Moscow wage war against Ukraine. In return, the Kremlin allowed Pyongyang to have its pick of sophisticated hardware – a huge boost for a regime that commands predominantly outdated, Soviet-era weaponry. While North Korea still has a long way to go in terms of upgrading all of its inventory, the newly strengthened ties with Moscow have reinforced the regime's strength and power. With a defence budget less than one per cent the size of China's, North Korea has had to choose between conventional and nuclear weapons. Kim has largely sided with the nuclear program. Earlier this year, a new intercontinental ballistic missile site was detected near Pyongyang where Kim's 'Winter Palace' once stood, marking the latest developments in the country's nuclear progress. Expanding these capabilities has allowed North Korea to create an effective deterrent against the US, especially in case of any future conflict with South Korea, but it has done this at the expense of upgrading conventional weapons like tanks, warships and fighter jets. 'North Korea has a lot of conventional military power – lots of troops, lots of tanks, but the aircraft are 1950s era,' said Michael Cohen, an associate professor at the Australian National University. 'I suspect Tom Cruise has had more time flying them than the North Korean pilots.' A year before Kim and Russian President Vladimir Putin signed their defence treaty, Kim visited a rocket launch pad at the Vostochny Cosmodrome in far eastern Russia. Leonid Petrov, a leading North Korea expert and dean of the International College of Management in Australia, described the visit as a 'shopping trip' for Kim as he 'named the price for sending North Korean troops and conventional armaments' to Russia. North Korea has since received an unspecified number of short-range air-defence systems and 'advanced electronic warfare systems including jamming equipment' from Russia since the visit, according to South Korea's Yonhap News Agency. Pyongyang has also recently shown off a number of new weapons that closely resemble Russian arms, including a supersonic cruise missile, drones, and a new fighter jet. Satellite images have also shown a rapid expansion of North Korea's drone programme. A report from the Centre for Strategic and International Studies said that North Korea was 'likely incorporating Russian battlefield experience' as it enhanced its drone capabilities. 'North Korea is now getting unlimited access to Russian natural resources, technology, military and ideological support,' said Dr Petrov. Bringing in cash North Korea is subject to dozens of sanctions, imposed by the United Nations, the European Union and governments including the United Kingdom, which aim to cut off Pyongyang from the international banking system as well as arms sales. While Russia has become an increasingly important partner in circumventing these restrictions, Pyongyang's relationship with China has also helped keep it afloat. Beijing is believed to have provided Pyongyang with military and nuclear expertise and a huge chunk of its foreign currency. 'China has been bankrolling the North Korean regime for a long time. About 95% of North Korean trade was with China for decades,' said Dr Petrov. Ms Hosaniak explained that North Korea is able to produce commercial goods domestically at a very cheap rate in forced labour camps, then sell them to the international market through China. She said: 'These goods can be sold in the EU, the UK…There are no restrictions, as long as the labels say 'Made in China', although the goods were produced in North Korea.' Companies facilitating this trade almost always need to have state backing to do so. 'In order to trade with North Korea you have to have an official North Korean trading partner so this is really a government-to-government kind of business that is operated by so-called private businesses,' Ms Hosaniak said. Beyond commercial ties with China, the North Korean regime has also brought in cash through cyber theft, especially from overseas workers. Local news outlet Daily NK reported that dozens of researchers from North Korea had been sent to China and Southeast Asia earlier this year to carry out attacks against cryptocurrency exchanges, engage in illegal cryptocurrency mining and target network firewalls. Pyongyang was also revealed to be carrying out an illegal scheme known as 'laptop farming', in which dozens of laptops in the US were being remotely controlled by thousands of North Koreans using stolen identities. Through these increasingly refined schemes, North Korean hackers have stolen an estimated $6 billion (£4.4 billion) in cryptocurrency, according to analysis firm Chainalysis. Shattering illusions As Kim expands his country's defence and revenue streams, he also has to contend with a population of over 25 million people. The most effective way of doing this is to wage a full blown information war. 'The more information that North Koreans get, the more they would know that their government isn't being entirely truthful and life perhaps is better on the other side,' said Shreyas Reddy, the lead correspondent at local outlet NK News. Before the advent of the internet, it was significantly easier to do this, but now Pyongyang has had to develop its own technology and enforce new, draconian laws. A key way that outside information has entered the country was through USB sticks and CDs. These contain a wide variety of media, from South Korean media to much more sensitive information about human rights and politics. The COVID-19 pandemic dealt a major blow to these efforts, as North Korea shut its borders and erected an electric fence between it and China. A new law introduced in 2020 also increased the punishment for anyone caught consuming or sharing foreign media and in 2023, Kim outlawed common South Korean phrases and made it illegal to speak in a South Korean accent. 'Videos smuggled out of North Korea show people being punished severely for these sorts of incidents and we've heard unverified reports about executions or other permanent punishments for watching or accessing foreign culture,' said Mr Reddy. The constant evolution of censorship and propaganda efforts have allowed Kim to retain an upper hand in the long-standing information war upon which his reign depends. Most experts agree that North Korea will continue on the same trajectory. Kim is only 41 years old and has put in place numerous mechanisms to ensure that his grip on power remains ironclad, while also posing a major threat to enemies abroad. His newly cemented partnership with Russia, forged from shared isolation, is the latest of these efforts. 'Politically, economically, militarily, it makes them stronger,' said Dr Petrov. 'Both need this alliance. It's a mutually beneficial symbiosis of dictatorial regimes, which have been at war with their neighbours for many years.'
