Morgan_Stanley_Fixed-Asia_Macro_Strategy_Addressing_Key_FAQs_in_TWD-115229487_12页_1mb

Morgan Stanley TWD Analysis Summary

Key Points:

• TWD Rally Drivers: The largest single-day TWD rally since the 1980s was primarily driven by exporters selling USD based on currency appreciation expectations and foreign equity inflows.
• Exporter Behavior: Due to a strong USD and high US yields, exporters' FX conversion and hedge ratios declined from 77% to 73%.
• Hedge Ratio Impact: While USD weakening could increase export lifers' FX hedge ratios, recent high hedging costs (especially for TWD investors) may delay action.
• Taiwan's USD Holdings: Taiwan investors hold substantial USD assets ($831 billion), highlighting against USD interest rate cuts.
• Valuation: TWD NEE is at the top of its +/-5% band, indicating overvaluation. Equity strategists remain cautious on Taiwan equities.

Recommendation:

• Neutral stance on TWD due to exporters' USD selling offsetting valuation gains.
• Trade ideas: Exit short TWD/JPY; maintain positions in USD/CNH and risk-free bonds.

Report Notes:

• Conflicts of interest and disclosures noted.
• Equity team recommends caution, citing semiconductor risks.
• Analyst certification provided.