Power And Dollar

How is Taiwan’s Election Affecting Your Portfolio?

Taiwan’s presidential election is to be held on 2008.03.22.A.  Since Taiwan is half a day ahead of US, the stations will open starting tonight.  What is at stake (of your wallet)?  CNN gives a decent last day summary: 

http://www.cnn.com/2008/WORLD/asiapcf/03/21/taiwan.elections.ap/index.html 

The first industry is computer component manufacturing.  Taiwan’s computer component manufacturing has the greatest market share in the world.  It will directly affect the manufacturing costs of everyone from Dell and HP to IBM.  Taiwan’s computer component manufacturers can produce any kind of PCs without outside vendors.  The only thing they lack is brand name.  If Ma Ying-jeouwins this election, the costs from these manufacturers will come down because Ma Ying-jeou’s policy will favour stronger commercial ties between Mainland China and Taiwan.   

Financial services industry will get a real boost.  If Ma Ying-jeouwins, that will create foreseeable stability required for Taiwan.  FDI will increase as a result.  Taiwan FIs will be able operate in Mainland, not only a greater amount of them, but also in a greater geographic span.  Currently, only 1 bank is allowed to operate in only 1 city in China.  Capital of Taiwan residents and companies held in overseas will also flow back to domestic market.   

Shipping and hospitality industries will get receive more customers from Mainland China.  Taiwan airlines will get a better coverage in the future.  Their air fleets will finally get the cash flow to finance needed replacements.   

However, this is not a sure win for Ma Ying-jeou.  DPP is within a striking distance.  The poll may suggest a comfortable lead for Ma Ying-jeouover DPP by US standard.  These polls are known to be unreliable not by the bias of the pollsters but by voters.  DPP voters traditionally lie to the pollsters or remain silent.  Conventional wisdom gives an additional 20% point to DPP. 

In the case of a DPP victory, it will not be the end of the world.  CPP may have learnt something no one is privy of in this election and thus gave sweet announcement to DPP’s outgoing president Chen Shui-bian in the past days to prepare for DPP’s victory.  If DPP indeed wins, computer component manufacturing will not get anything as a result.  FIs will not get the benefit above.  Shipping and hospitality will get some reward due to DPP’s convergence of its Mainland policy to Ma Ying-jeou.  However, the benefit will not be as great.  Agriculture has been rumored to be negatively affected by this election in the case of Ma Ying-jeou.  However, Taiwan does not have big publicly traded agriculture companies.   

The advantage of Taiwan’s agriculture over Mainland is the R&D side of agriculture.  The most potential of Taiwan’s agriculture is how to turn their R&D into more productive scale: for a bigger market and/or for more capital intensive firms. 

All Japanese firms with heavy investments in Taiwan will get affected.  One particular industry people may oversee is content distribution industry.  If KMT wins, these firms may get crowded by a Mainland fever.  So, these contents range from comic books to cables to films.

Since the results will only be known on Sat US time, the first trading day to react is Monday.  There is no need to rush for anything.  Do not place bets in haste.

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March 21, 2008 - Posted by | business, China, china politics, chinese, Current Affairs, Current Events, economics, election, 馬英九, finance, opinion, politics, stock, Taiwan, Thoughts, trading, 台灣, 中國

3 Comments »

  1. Interesting. Do you think one party over the other calms or stirs the military/sovereignty tensions ?

    Comment by in2thefray | March 22, 2008 | Reply

  2. Yes, I do. The winner we have now will deliver a calmer and more stable East Asia.

    Comment by royho | March 22, 2008 | Reply


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