Offshore non-deliverable forward points widened again on Saturday as traders priced a weaker New Taiwan dollar, after foreign investors dumped a record NT$302.5 billion of Taiwan equities on Wednesday and the currency slid past NT$32.5 per U.S. dollar during the week.
Equity pain drove the FX bid
The weighted index closed at 47,111.26 on Friday, recovering 141 points after a 1,655-point plunge on Wednesday, but still down more than 1,700 points from the October 6 peak near 49,823. Foreigners sold NT$461 billion for the week, including the single-day record outflow, Taiwan Stock Exchange data show. Portfolio hedging spilled into currency forwards, lifting the one-month NDF premium to levels dealers last saw during the June 2025 tech correction.
What Monday’s open faces
Taiwan’s cash market is closed for the weekend, but index futures fell 1,144 points in Friday’s night session after the PHLX Semiconductor Index dropped nearly 4 percent in New York. Dealers said importers are still covering oil bills after Brent crude touched US$110, while exporters hesitate to convert U.S. dollar receipts until the central bank signals how far it will let the NT dollar weaken.
“The question is not whether the CBC steps in, but how visibly,” a Taipei bank treasurer said, referring to the Central Bank of the Republic of China (Taiwan). Traders are watching tomorrow’s U.S. mega-cap earnings for cues on whether AI spending fears ease enough to slow the equity outflows.
Domestic funds provide a cushion
Investment trusts bought NT$52.8 billion on Friday, partially offsetting foreign sales, and several government-linked stabilization funds reiterated they stand ready to support the market if disorderly moves continue. Retail investors, meanwhile, added NT$18.4 billion through regular savings plans, according to exchange filings.
Analysts at Moore Investment Consulting, writing in the Commercial Times on Saturday, said support near 46,800–47,000 points could hold if foreign selling slows and the NT dollar stabilizes below NT$32.8. They cautioned that a sustained move above NT$33 would force dividend-focused funds to cut exposure ahead of the year-end payout season.
Policy and politics in the background
Lawmakers are simultaneously debating competing cash-handout bills, which usually pressures the currency when markets expect more fiscal spending. Finance Minister Chuang Tsui-yun has argued the administration’s NT$10,000 universal grant is already funded in next year’s budget, while opposition parties push a NT$20,000 special act. Currency traders say the fiscal noise adds to volatility even when the central bank stays quiet over the weekend.
Historical context
The NT dollar’s 4.63-NT slide last week was the steepest since June 2025, when markets repriced U.S. rate hikes. Dealers note that Taiwan’s current-account surplus still tops US$100 billion annually, giving the central bank ammunition to smooth disorderly moves without burning through reserves. Still, the speed of foreign selling—NT$3.025 trillion in a single session—surprised treasury desks accustomed to gradual ETF rebalancing.
Life insurers, major holders of Taiwanese equities, said they would not chase the market lower but might rotate into financials and utilities if dividend yields exceed 4.5 percent. That rotation could stabilize the index even if foreigners remain net sellers through October.
Export-oriented small and medium enterprises told the Taiwan External Trade Development Council that every 0.1 NT depreciation adds roughly NT$800 million in monthly translation gains on U.S. dollar invoices, but also raises imported fuel and chip equipment costs within a quarter.