Taiwan corporate debt limits seen curbing currency speculation

Taiwan has imposed restrictions on foreign investment in corporate bonds in a move seen as an effort to curb speculation in the island's currency.

The Financial Supervisory Commission (FSC) would cap overseas investors' holdings of company debt and bank debentures at 30 per cent of their Taiwanese securities from yesterday, according to a document sent to lenders.

Previously, there was no limit. Such buyers' holdings of government bonds, money market instruments and derivatives were already restricted to 30 per cent.

Taiwan's dollar has strengthened 1.7 per cent against the greenback in 2015 in Asia's best performance on speculation the central bank will refrain from joining a global wave of monetary easing.

It has also rallied against Japan's yen and South Korea's won, harming the island's exporters who compete with their counterparts from those countries. Taiwan attracted US$70 billion of net inflows in the first three months of the year, FSC data show.

"As fund inflows have been strong recently, the move was probably to restrict the channels through which foreign investors can park their funds," said Woods Chen, an economist at Ta Chong Bank in Taipei. The government is "also hoping to alleviate the ample liquidity", he said.