The New Taiwan Dollar exchange rate forecast faces challenges; can the market avoid a replay of the May scenario?

Since the release of the US-Taiwan joint statement, the difficulty in predicting the New Taiwan Dollar exchange rate has sharply increased. The market's focus has shifted from the exchange rate trend itself to potential chain reactions. According to the latest operational data disclosed by CTBC Financial Holding, the company's pre-tax profit for the first three quarters reached NT$69.96 billion, with a net profit of NT$60.76 billion, and a return on equity maintained at a high level of 17.46%. While financial institutions' performance remains steady, exchange rate predictions have become a key variable affecting the performance of various industries.

**Exchange Rate Forecast Faces Dual Uncertainty**

Gao Lixue, spokesperson for CTBC Financial Holding, pointed out that, referencing experiences from Japan, Korea, and other countries, similar joint statements may not necessarily trigger intense exchange rate volatility. However, the New Taiwan Dollar opened today at 31.13 and appreciated by 2 cents, then the gains narrowed, reflecting market caution regarding exchange rate forecasts. The offshore non-deliverable forward foreign exchange for the New Taiwan Dollar jumped by 4 cents after the statement was released, indicating a noticeable change in market expectations for short-term exchange rate predictions. Analysts suggest that the central bank will intervene to maintain exchange rate stability and prevent excessive single-day fluctuations from putting pressure on the foreign exchange market.

In the short term, the New Taiwan Dollar is expected to fluctuate around the 30 NT$ level, which is the consensus forecast among industry experts. In the medium to long term, the New Taiwan Dollar has strong fundamental support, but if a strong appreciation trend similar to early May repeats, risks will significantly increase. Historical reviews show that the New Taiwan Dollar once appreciated to a high of 28 during tariff negotiations. The current 31 NT$ level indeed has room for appreciation, but the central bank's policy operations will directly determine future exchange rate trends.

**Industry-Level Multi-Layered Impact from Exchange Rate Predictions**

Traditional industries will be the first to face impact. If unfavorable exchange rate forecasts lead to sharp appreciation, companies will face dual pressures from tariffs and exchange rates, compressing profit margins. Life insurance companies holding large amounts of foreign currency assets will see valuation losses directly translate into accounting losses, potentially causing significant deficits.

The situation for tech stocks is even more complex. The Taiwan stock market opened higher today, with the weighted index rising more than 200 points in the early trading session, and TSMC also strengthened. However, analysts warn that foreign institutional investors have recently sold over NT$300 billion, making it difficult for the weighted index to effectively break through the 28,000-point barrier. Market funds are shifting from AI-related stocks to memory groups, forming a clear rotation among individual stocks. Tech stocks face the risk of overvaluation in AI concept stocks, and combined with the uncertainty in exchange rate forecasts, this could trigger a correction in the overall Taiwan stock market.

**Key Events and Outlook This Week**

This week, market focus is on NVIDIA's earnings report and the settlement of the Taiwan index futures. In the short term, the Taiwan stock market is expected to remain volatile at high levels, with exchange rate forecast variables continuing to influence market sentiment. Investors should closely monitor the potential impact of exchange rate fluctuations on various industries and adjust their portfolios accordingly to hedge risks. Although the financial sector's performance, with an EPS of NT$3.06, remains stable, macro risks still warrant caution.