The appreciation of the Taiwan dollar has defeated the US Treasury bond ETF. If it challenges 27.6 in the second half of the year, how to adjust asset allocation?

Last Friday, the Taiwan dollar was surprised to reach 28. The negotiation with Vice Premier Cheng Lijun in the United States went smoothly, and the market expects the Taiwan dollar to appreciate again. The Taiwan dollar has appreciated by 12% this year, which not only puts huge pressure on overseas merchants and life insurance companies, but also makes debt frogs unable to withstand the exchange loss and exit the market one after another. If USDTWD challenges the low of 27.6 in 2021 in the second half of the year, how should investors adjust their asset allocation?

Taiwan faces massive redemption of US bond ETFs

According to Bloomberg statistics, Taiwanese investors are selling their holdings of U.S.-focused exchange-traded bond funds at the fastest rate since the outbreak of the new crown epidemic. So far this year, bond ETFs listed in Taiwan have seen outflows of about US$3.3 billion. Data shows that this is the largest half-year outflow since 2020, and the outflow rate exceeds other Asian markets.

Analysts said concerns about volatility in U.S. Treasuries and a sharp rise in the Taiwan dollar were prompting investors to pull money out.

( What is the difference between bonds and bond ETFs? Interest rate cuts will drive bond prices up. Why didn’t I make money on 00679B? )

Debt frogs could not bear the exchange losses and exited the market one after another

Retail investors, who dominate the ETF market, could be particularly hard hit because they “leverage using collateralized loans, face margin calls and are forced to redeem.”

I still remember when I was having dinner with friends two years ago, the hot topic was to borrow low-interest New Taiwan dollar mortgages or loans (interest rates are about 1.5% to 2%) and buy US Treasury bond ETFs with interest rates as high as 5%, using leverage to magnify the original price difference of about 3%. In addition, the New Taiwan dollar was depreciating at the time, so it could almost be said to be "making money on both bonds and foreign exchange."

However, looking at the performance of the Cathay 20-Year US Bond ETF (00687B), which is often bought by Taiwanese, the year-to-date decline is 12%. Compared with the 12% appreciation of the New Taiwan Dollar this year, it can be inferred that although the bond price has remained stable, it has all been dragged down by the exchange loss! Recently, we have also heard of many cases where customers were forced to recover their margin or even redeem their bonds due to margin calls. It is conceivable that there has been a bloodbath in recent days.

As for whether the outflow of US$3.3 billion shown in Bloomberg's data is the main reason for the appreciation of the Taiwan dollar, I think it is just a small factor that accelerates the appreciation of the Taiwan dollar.

Taking two brokers, Taipei FX and Yuantai FX, as examples, the average daily trading volume of USDTWD (US dollar against Taiwan dollar) is about 2 billion US dollars. 3.3 billion US dollars is not a large amount, and it is spread over six months, making it even less likely to have a direct impact on the exchange rate. However, it can be observed from the trading volume in the above figure that whenever the ETF price drops sharply, it is usually accompanied by an increase in trading volume, and the largest trading volume falls in early April when the Taiwan dollar appreciates sharply, which shows that there is still a certain causal relationship between the two.

Negotiations in the US went smoothly, and the Taiwan dollar surprisingly reached the 28-digit mark

As the grace period for reciprocal tariffs in the United States counts down, Executive Yuan Vice Premier Cheng Lijun and Chief Negotiator of the Office of Economic and Trade Negotiations Jenny Yang led a government team on June 25 to hold the second round of physical consultations with the United States on the issue of reciprocal tariffs in Washington, D.C., and communicated with U.S. Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick. Cheng Lijun said that both sides believe that the negotiations have made constructive progress so far and hope that the negotiations will achieve a mutually beneficial and win-win result.

The two sharp appreciations of the Taiwan dollar this year occurred when the administrative team went to the United States for negotiations, which inevitably gives people a lot of room for speculation.

Last Friday, the Taiwan dollar briefly rose above the 29 mark. Although the exchange rate was pushed up in the late trading and finally closed at 29.180, traders generally believed that it was just a show and did not want the Taiwan dollar to appreciate too quickly.

( Taiwan dollar hits 28, TSMC is ready to hedge against risks with billions of dollars )

Individual investors are going abroad to exchange currency and deposit US dollars

The recent sharp appreciation of the Taiwan dollar has also attracted many people who want to go abroad to exchange currency. Both the Japanese yen and the RMB have seen their long-lost sweet prices, and many banks are even experiencing a shortage of RMB cash!

According to banking and financial peers, many retail investors have recently rushed to buy US dollars and deposit them in high-interest time deposits. Those with good bargaining power can afford time deposit rates of 4% to 4.5%.

What price will the New Taiwan dollar reach in this wave of appreciation? Many people see the low point of 27.6 in 2021, which still has about 4.8% appreciation space from the current price of 29. However, if it can be deposited in financial products with an interest rate of more than 5%, it seems to be invincible.

Will USDTWD challenge 27.6 in the second half of the year? How will assets adjust their allocation?

If the Taiwan dollar really has the opportunity to challenge the price of 27.6 in the second half of the year as the market expects, how will you adjust your asset allocation?

According to previous calculations by ABMedia, for Taiwanese investors, even if Bitcoin performed well in the first half of 2025, rising from $94,419 at the beginning of the year to $106,545 on June 27, an increase of 12.8%, the actual return calculated in New Taiwan dollars was only 0.13%, which can be regarded as a break-even. This is not because Bitcoin itself performed poorly, but the change in exchange rate played a key role behind it.

(Just owning the New Taiwan Dollar is a complete victory! ETH lost to the New Taiwan Dollar this year, and all the US dollars earned by Bitcoin were lost )

In my opinion, if the US dollar is only a fixed investment and a partial asset allocation, investors can choose to continue holding it in US dollars and continue to invest to increase returns. After all, there are many U.S. stocks and investment products denominated in US dollars, and the investment return rate has performed well in the long run. The exchange rate is a multi-year cycle. Now that the US dollar is depreciating, there is still a chance that it will rise again in a few years. Investors do not need to pay too much attention to the exchange rate trend, but should focus on investing in US dollar assets.

If a large amount of US dollar income continues to be received in the future, investors can conservatively convert at least the second half of the year's income back to New Taiwan dollars when the price is high, similar to the exporter's "pre-sale" to lock in the exchange rate. If the New Taiwan dollar continues to appreciate in the second half of the year, at least the income for the past six months can be locked in at a better exchange rate. After all, US dollar income is still an important source of living expenses for some investors.

Investors may also consider converting US dollars into other foreign currency assets, making appropriate allocations to non-US dollar assets such as the Japanese yen and the euro, and diversifying investment and exchange rate risks through foreign currency time deposits, foreign currency bonds or multi-currency ETFs, or even investing in overseas stocks denominated in these foreign currencies.

As trade talks gathered pace ahead of the July 9 deadline and the Senate continued negotiations on the Big, American Act, the S&P 500 closed at a record high on Friday (6/27) and the Nasdaq also hit a record high. Cryptocurrencies rose across the board, with Bitcoin returning to 108K and Ethereum above $2,500.

Tariff agreement accelerates

Trump announced in April that he would suspend tariffs on dozens of trading partners for three months, which stimulated the Asian market that was hit hardest by tariffs, but with the July 9 deadline approaching, Finance Minister Bessant hinted that some agreements might be extended.

The Indian trade team has extended its stay in Washington to resolve differences, people familiar with the matter said, and both sides hope to reach an agreement before the July 9 deadline. European Commission President Ursula von der Leyen told EU leaders in a closed-door meeting that she was confident a deal could be reached before the deadline. In addition, China also confirmed the details of the trade framework agreement reached with Washington.

Big, Beautiful Act vote continues until Monday

Negotiations over President Trump's Big, American tax cut bill continue as Republicans try to convince opponents to support it, with votes expected to continue into Monday. The measure is expected to add nearly $3.3 trillion to the U.S. deficit over the next decade.

Consumer confidence rebounded, inflation slightly higher than expected

On the economic front, consumer confidence rose sharply to a four-month high and inflation expectations improved significantly. Data also showed that although the core personal consumption expenditure price index rose slightly more than expected, its increase was consistent with limited price pressures, which will enable the Federal Reserve to start cutting interest rates later this year.

U.S. Treasury gains were hampered by economic data on Friday that showed stronger-than-expected inflation. Money markets continue to price in at least two rate cuts from the Federal Reserve by the end of the year, and bets on a third cut could grow if Thursday's jobs report is weak.

Bitcoin returns to 108K, Ethereum reaches $2,500

Cryptocurrencies generally rose, with Bitcoin returning to 108K and Ethereum standing above $2,500.

Ripple gave up its cross-appeal against the SEC, accepted a $125 million fine and a permanent ban that will remain in effect. Ripple Labs CEO Brad Garlinghouse announced on social media that Ripple will put an end to this and focus on the most important things and move into a new chapter. XRP's legal status as a non-security remains unchanged, and XRP rose by more than 10% in 7 days.

Solana also returned to $150 due to the possible launch of a spot-collateralized ETF, with a 7-day increase of 16%.

( Solana ETF is about to be launched, and the staking function has been approved. Will ETH also follow suit? )

Osaka will host the 2025 World Expo, attracting global attention. As Osaka's housing prices are relatively cheaper than Tokyo, which is a saturated market, and the tourism industry has been booming recently, it has become the first choice for many Chinese immigrants to consider retirement. However, because of the large profit margin, investors want to invest, but are hindered by the barriers of language and legal knowledge, giving fraud groups an opportunity to take advantage of Osaka, becoming a new stage for land fraud groups. Mr. Atom, a well-known Hong Kong YouTuber, revealed a transnational land fraud case that specifically targeted Hong Kong people. At almost the same time, NHK and many Japanese media also disclosed the recent "Osaka Landlord" incident that shocked Japanese society. The fraud group pretended to be a landlord and successfully defrauded more than 1.4 billion yen, and the victims even included well-known Japanese and Chinese companies.

Although the two fraud cases are not directly related, the common point is that they both used "Osaka real estate investment" as a cover, and the victims were all Chinese, so that the buyers invested a large amount of money before realizing that they were deceived. The following is a comprehensive report.

Atomic Files reveals: Hong Kong people mistakenly believed in the "Osaka Dream Project" and their retirement savings went down the drain

Hong Kong Youtuber Mr. Atom received reports from several victims who attended a real estate investment conference and wanted to invest in Osaka real estate for retirement. After investing their retirement funds, they found that they had been "cheated". The construction project in Japan had long been suspended, and the construction company had been replaced. The members of the ground division group included Chinese and Japanese. According to Mr. Atom, some Chinese even changed their names to pretend to be Japanese. The scammers continued to hold real estate briefings in Hong Kong to deceive new investors and completely ignored the judiciary. These victims cried and asked lawyers to file a lawsuit in Japan, but the Japanese police did not take it seriously. They had no choice but to turn to self-media for help.

Mr. Atom recently released a video revealing that many Hong Kong victims attended a real estate investment conference and mistakenly believed the fantasy blueprint of "Japan's retirement paradise" and invested millions of Hong Kong dollars in retirement savings in Osaka real estate investment projects. The victims originally thought that they had bought an investment property that was about to be completed, but they found that the construction project had long been suspended, the responsible builder had changed the company name, the person in charge could not be contacted, the contract could not be fulfilled, and the land ownership was unclear, among other complicated situations.

What is even more shocking is that this Osaka real estate investment fraud case is suspected to be operated by a transnational fraud group whose members include Chinese, Hong Kong people and Japanese. They held briefings in luxury five-star hotels, specifically targeting the Chinese community who want to invest in Japanese real estate, and they are still continuing to defraud.

Many victims went to Japan to seek legal assistance, but were unable to get help due to language, legal knowledge, cross-border judicial procedures and other issues. Even if they hired a lawyer, the Japanese police were said to be relatively passive in responding to reports from non-residents, leaving them with almost no one to turn to and could only resort to self-media.

Japanese media exposed the methods of the landowner: impersonating the landlord, changing the company registration, and defrauding 1.45 billion yen

Recently, Japanese media have reported extensively on a "Ground Master" fraud case that is highly similar to the Netflix plot. This case was led by Japanese, but the methods have many similarities with the case exposed by Mr. Atom. The criminals took advantage of the victims' human weaknesses of wanting to invest in Osaka real estate, which is full of gold and relatively cheap, and defrauded many victims of their money.

The main suspects in the Osaka Ground Master incident are Fukuda Hiroshi and Ryohei Ira. They impersonated the owners and land ownership companies of three prime plots of land in Minami-ku, Osaka City. A female member of the fraud group, who was in her sixties, pretended to be the president of the company that owned the land. She used a forged driver's license (Note: Japan, like the United States, does not have personal ID cards, and only requires a driver's license to prove identity) to submit relevant documents to the local household registration unit, successfully defrauded civil servants, and changed the registered owner of the land. The fraud group also signed a sales contract with two companies that wanted to acquire the real estate, and defrauded 1.45 billion yen, which is almost the same as the plot of the Netflix Japanese drama "Ground Master". The deceived real estate developers thought they had picked up a bargain, but the result was nothing.

How did the Osaka Ground Division incident come to light?

According to NHK, the manager of the area said that he saw someone trying to open the door of a property but found that the key had been changed. The manager contacted the owner of the house, but he was surprised to say that he had never sold the house. The manager said that several people thought they bought the house, but they actually bought "loneliness". The real owner suggested to call the police immediately, which exposed the whole incident.

The president of the company that owns the property revealed in an interview that he had noticed something unusual as early as February last year. At that time, the president commissioned a lawyer (similar to a notary in Taiwan) to check the company registration, and found that the "representative director" column had been changed to a person named "粂" without his knowledge.

The Japanese government department mistakenly believed that the ground engineer forged the documents, and the original owner was furious and filed a lawsuit

The most ridiculous thing is that the land engineer can "make the fake look real" and deceive civil servants with forged documents. Even the Japanese ward office and the Legal Affairs Bureau were fooled. The commissioned lawyer ran to the ward office and the Legal Affairs Bureau in a panic and asked to see the land registration application documents, but they refused to show them on the grounds that the documents contained personal information and did not accept them. When the president of the property received inquiries from many real estate companies about his property, he realized that this was a "land fraud."

The president said that even though he explained to the Legal Affairs Bureau and other public departments that the property rights change registration was fake, they did not believe it and claimed that the documents they received were genuine. As a result, he ended up spending a lot of time and money on a civil lawsuit, and he had no place to vent his anger.

How did the suspect impersonate the owner?

NHK interviewed several people familiar with the matter and learned about the specific modus operandi of the ground division. According to the disclosure of investigators and civil trial documents, the suspects of the fraud group first forged an IOU, claiming that the female president who owned the property had borrowed money from them and had not repaid it. They presented the IOU to the district government, pretending to be the creditor, and successfully obtained a photocopy of the female president's resident registration card.

According to Japan's Basic Household Registration Act, as long as the local government deems it appropriate, it can use debt collection as an excuse to copy the debtor's resident registration card and other documents to the creditor. The Japanese police told the media that this system has been abused.

In this way, the ground-based fraud group illegally obtained the personal information on the president's resident registration card. An elderly female member of the fraud group used a fake ID to impersonate the president and successfully deceived the real estate developer. It was just like a Netflix plot. All they had to do was find someone who looked very similar and forge documents to deceive civil servants and real estate companies.

Osaka real estate investment is a bait, information gap and lack of legal knowledge are the key

Although the backgrounds and criminal members of the two cases are different; one is the Chinese community being defrauded by a multinational group, and the other is operated by a local Japanese fraud group, but the logic of the fraud is surprisingly similar. They use Osaka real estate as bait to commit fraud and exploit existing loopholes in Japan's land administration and judicial systems. The fraud group pretends to be landlords and builders and provides false documents to make it difficult for investors to verify. Although the head of the Osaka land engineer case is Japanese, according to reports from many Japanese media, most of the victims are Chinese.

The author believes that the old saying "Don't Trust, Verify" is always useful. When you hear a fantasy investment target that is "Too Good To Be True", don't be fooled by the scam's rhetoric. There is no free lunch in the world. Protect your own wealth and property.