Traders on Monday had their first chance to react to the victory of Tsai’s Democratic Progressive Party. The Taiex stock benchmark rose as much as 0.6% in early trading, while the local dollar strengthened 0.4% against the U.S. dollar to its highest level since June 2018. The yield on 10-year government bonds slipped to 0.6400%, near the lowest since August.
Saturday’s result is helping extend what has been a positive period of investor sentiment toward Taiwan. Stocks have recently touched the highest levels in nearly three decades. Taiwan’s dollar strengthened for an eighth week last week in its longest winning streak since 2013 and government-bond yields remain near all-time lows.
“Taiwan stocks tend to rise after an election, as uncertainty is removed,” said Li Fang-kuo, chairman of President Capital Management. He sees the Taiex index hitting a record high by April, helped by continued inflows and a strong outlook for Taiwan’s technology sector.
The local currency is seen rising to 29.5 per U.S. dollar by year-end, driven by the appeal of companies related to 5G and further repatriation of investment, according to Cliff Tan, head of global markets research for East Asia at MUFG Bank Ltd. Government bonds are expected to be boosted by limited supply under Tsai’s leadership, said Kevin Shih, a trader with Jih Sun Securities Co.
Profit-taking pressure may emerge nearer the Lunar New Year holiday, say analysts, while the outcome of the expected trade deal signing and recently heightened Middle East tensions will also be factors.