Amid the current weakness of the US dollar, the Taiwanese dollar is on an appreciation trend. However, the central bank will not allow for a violent appreciation of the TWD, but will rather observe the appreciation levels of other Asian currencies before it gradually moves towards the 20s. In May, as the TWD surged, foreign investors noticed the remarkable arbitrage opportunity arising from the USD's weakness and the TWD's appreciation, leading to a massive influx of hot money into Taiwan, primarily directed towards the stock market, resulting in a surge in funding momentum. Nevertheless, this week, the Taiwanese stock market witnessed volatility before the Dragon Boat Festival holiday, causing some retraction from foreign investments. Despite this, with the TWD continuing to appreciate, 220 billion in hot money remains anchored in the stock market, ready to capitalize on stock and currency arbitrage.
However, Bank Governor Yang Chin-long has warned that if vulture investors appear, they must be dealt with accordingly.

In April, U.S. President Trump introduced tariffs and heralded 'Made in America', resulting in global economic turmoil and, combined with the high national debt, triggered turmoil in U.S. treasuries. The trend of a weaker USD has prompted Taiwanese life insurers, which hold significant amounts of U.S. treasuries, to anticipate a TWD appreciation, thereby initiating hedging strategies through forward contracts. As foreign investors saw the widening disparity between the TWD's forward and spot rates, they expected the TWD to continue its rise and thus began flowing into Taiwan. However, if this influx of capital does not lead to actual investments, the central bank may treat it as 'vulture' activity and eject them from Taiwan. Consequently, the incoming foreign funds have opted to dock in the Taiwanese stock market.

Since May, the hot money invested in Taiwanese stocks has surged past 250 billion at its peak, aiding in the rebound following a stock market crash, where the TWD gained over 4,500 points at its highest, though it has since retracted about 500 points prior to the Dragon Boat Festival, yet 220 billion remains in foreign hands, recovering from the declines experienced when Trump announced tariffs. Institutions indicate that foreign investors are savvy; when they enter the TWD market, they naturally invest in stocks as well. This round of foreign capital entering the stock market lacks a distinct direction, as they aim to secure arbitrage benefits. Concurrently, they have been shorting futures to hedge their positions, leading to an impressive open short position of 47,014 lots, clearly showing that this hot money is aimed at currency arbitrage.

This wave of foreign investment is focused on the appreciation trend of the TWD, with hot money pouring into Taiwanese stocks primarily to profit from the currency differential, and making gains on the stock market is an added benefit. Moreover, on YT, analyst Gao Minzhang from Huaguan Investment Consulting mentioned, "This round of funding mainly focuses on weighted and high-priced stocks; for instance, a single share of Sechip-KY has surged from 2,125 TWD to a peak of 2,980 TWD, and it is still in the stage of preparation for another assault, meaning an investor could potentially earn 700,000 TWD from just one share of Sechip-KY."

Will the influx of hot money continue? The G7 finance ministers from the US and Japan have stated that currency issues will depend on the current economy, and given the weak USD, non-USD currencies, including the JPY and TWD, will naturally show an appreciation trend. Thus, this hot money is expected to continue flowing into Taiwan. The pressing question is whether Taiwanese investors will benefit from this surge. The answer appears to be very few. Due to the massive losses experienced during the April stock market crash and the ongoing ambiguity surrounding tariff situations, retail investors have largely adopted a passive approach, hoping for a natural recovery over time, leaving the current stock market dominated by foreign and institutional investments, while retail investors remain cautious, leading to a slowdown in both the automotive and real estate markets.