The strengthening of the New Taiwan Dollar has triggered a chain reaction in the market, and the Taiwan stock market is facing a test

Following the announcement of the Taiwan-U.S. exchange rate linkage policy, the New Taiwan Dollar's appreciation has become the market focus. After opening at 31.13 NT dollars, it quickly appreciated, with non-deliverable forward foreign exchange rates even jumping by 4 cents at one point, indicating a clear change in market expectations for the exchange rate. However, the gain soon narrowed significantly, showing that the central bank is actively intervening to prevent excessive volatility from impacting the financial markets.

**Historical Benchmarking and Central Bank Considerations**

Referring to the actual trends after Japan, Korea, and other countries signed similar policies, exchange rates may not experience drastic fluctuations. CTBC Financial Holding's general manager spokesperson, Gao Lixue, stated that the New Taiwan Dollar will fluctuate within the 30 NT dollar range in the short term, supported by strong fundamentals in the medium to long term. It is worth noting that the New Taiwan Dollar once appreciated to a high of 28 NT dollars during tariff negotiations. While there is indeed room for appreciation to 31 NT dollars, the central bank will intervene appropriately to maintain stability.

**Industry Facing Dual Pressures**

If the New Taiwan Dollar repeats the strong appreciation trend seen in early May, chain risks will gradually emerge. Traditional industries will face performance pressures under the dual attack of tariffs and exchange rate appreciation, and large foreign currency assets held by life insurance companies may see valuation losses. Concerns over overvaluation of tech stocks combined with a strengthening NT dollar may trigger a market-wide pullback in the Taiwan stock market.

**Short-term Divergence in Taiwan Stock Market**

The Taiwan stock market opened higher today, with the weighted index rising more than 200 points in the early trading session, and leading semiconductor foundry TSMC also advanced. However, recent foreign selling has exceeded NT$300 billion, making it difficult for the index to break through the 28,000-point level. Market funds are shifting from AI-related stocks to memory groups, showing rotation among individual stocks. CTBC Financial Holding's pre-tax profit reached NT$69.96 billion, with an EPS of NT$3.06, and a return on equity of 17.46%, maintaining a high level.

This week, NVIDIA's earnings report and Taiwan Futures Index settlement will be key market observations, with the Taiwan stock market expected to remain volatile at high levels in the short term. Investors should closely monitor the potential impact of a stronger NT dollar on various industries and adjust their investment positions accordingly.