* Optimism on iPhone 8 has attracted foreign funds
* Imagination Technology crash may be warning for Apple
* Taiwan investors will anxiously follow Trump-Xi meetings
By Faith Hung and Nichola Saminather
TAIPEI/SINGAPORE, April 6 Taiwan's stock market
has risen almost 20 percent over the past 15 months but gains
have slowed recently as investors drawn by anticipation of the
iPhone 8 pay more heed to risks previously dismissed.
With about one-third of its stocks - including heavyweights
Taiwan Semiconductor Manufacturing Co (TSMC)
and Hon Hai Precision Industry - dependent on Apple
Inc., Taiwan is vulnerable to sharp declines if the
U.S. company turns away from the island for its major suppliers,
or if the iPhone 8 doesn't meet expectations.
A fate similar to Imagination Technologies' 70
percent plunge on Monday after Apple's decision to drop the UK
company as a major supplier cannot be ruled out.
Export-dependent Taiwan could also see its fortunes reversed
should U.S. President Donald Trump impose a border tax on
imports, or if he labels the island a currency manipulator.
A bad turn in Taiwan's mercurial relations with China, its
largest trading partner, could also make investors flee.
"So far the market has ignored the protectionist threat and
has focused on good aspects of Trump economic policy," said
Frank Benzimra, head of Asian equity strategy at Societe
Generale in Hong Kong, who has moderated his bullish stance on
Taiwan this year due to concerns about U.S. policies and rising
As many Taiwan companies have production facilities in
China, investors will closely watch the first meeting between
Trump and Chinese President Xi Jinping later on Thursday.
Trump has said he expects the meeting to be difficult given
his belief China has taken advantage of U.S. trade policies.
"Trump's protectionism could force Taiwan’s supply chain to
move to the U.S or raise their capital expenditures, without
actually expanding their market very much," said Tom Wu, chief
investment officer of global investments for Yuanta Funds in
Taipei. "That would put pressure on their earnings."
Taiwan had Asia's strongest foreign fund inflows in January
and February but was overtaken by India and South Korea in
March, according to Thomson Reuters data.
The inflows helped lift the Taiwan dollar about 6.7 percent
this year, making it the region's best performer after the
The currency's strength poses a potential problem for the
island's exporters, but Taiwan's central bank has been reluctant
to intervene, not least because of the threat of being labeled a
currency manipulator by the U.S. in a report on trading
partners' currency practices due this month.
Foreign interest in some technology stocks "has driven part
of that currency appreciation," said Oliver Lee, investment
director in Hong Kong at Old Mutual Global Investors, who is
underweight tech stocks including TSMC. "But then, there is that
underlying threat of Trump labeling them a currency
Despite the risks, some fund managers remain optimistic,
continuing to accumulate shares of TSMC and other Apple
"The story of the year is the iPhone 8 supply chain," said
Jeff Chang, chairman of Cathay Securities Investment Trust,
Taiwan’s largest fund house. "Our funds will continue to add
(Reporting by Faith Hung and Nichola Saminather; Editing by