TRANSCRIPT: A political shift in
Taipei with the election of Ma Ying-jeou and the
Kuomintang win for Taiwan, the week's Alpha Bet,
and Chinese markets bearish predicament...
Sinomania! Volume II Webisode 53, March 24, 2008
Ma Ying-jeou won the presidential
election on Taiwan with 58 percent of the vote
ushering the Kuomintang or KMT or Nationalist
party – the party founded by Sun Yat-sen – back
to power after a contentious eight year absence
during which the economy of Taiwan has stagnated.
Ma is to the party born raised on Taiwan and has
advanced degrees from the USA including a doctorate
from Harvard.
Ma is committed to quick action
on closer business and transport links with mainland
China across the tightly controlled Taiwan Straits
including airspace. But the first direct action
may be accepting a gift of Pandas, Beijing’s favorite
way to put a fresh face on old ties.
It is hard to underestimate how
significant this political change on Taiwan is
particularly while press outside Asia continues
to obsess on Tibet. For while the Chinese frontier
may appear unsettled on its Himalayan border the
island of Taiwan with 23 million people and one
of the largest economies in the world is growing
however slowly closer by popular choice.
The proponents of independence for
Taiwan had their biggest defeat in many years
this past Saturday. The vast majority of people
on Taiwan according to the latest polls want status
quo and a decision on Taiwan later. Of the decision
later crowd about an equal number want unification
as independence, around 10 percent each.
TAIWAN GAINS
What we can expect now is greatly
increased investment and trade flows particularly
to Shanghai and the coastal areas across the Straits
such as Fujian and Zhejiang provinces and an increase
of cultural influences in pop music, television,
and maybe someday a return of the KMT to national
politics. During the last election cycle in 2004
the KMT was rumoured to have operations in Fujian
and Shanghai. And in 2005 Ma Ying-jeou’s predecessor
toured China in an historic tour.
The Taiwan exchange’s benchmark
TAIEX Index (^TWII) surged March
24 up almost four percent to 8,865.35. Goldman
Sachs says the index may go to 10,000 this year
and their call was answered by a major influx
of foreign buyers. Morgan Stanley is also bullish
on Taiwan equities saying they are the best buys
in emerging markets, under-valued and under-owned.
The TAIEX sometimes called the TWSE
or TSEC is a weighted index of all listed common
shares on Taiwan’s exchange and was started in
1966. As recently as late January it was below
7,500 where it had essentially peaked back in
May 2006.
Shares in all major sectors rallied
with construction companies leading with a 6.7
percent gain and microchip companies – strong
in Taiwan– saw good gains. Expect increased offshoring
of chip production particularly to Shanghai to
accelerate.
Integration with China however will
carry some risk for Taiwan shares of older traditional
companies such as China Steel, Formosa
Petrochemicals, CPC Corporation as
they are subject to intense competition from their
big mainland rivals.
Also today the New Taiwan dollar
hit a ten-year high against the US dollar at 30.201
to the dollar.
THIS WEEK'S ALPHA
BET
This week’s Alpha Bet starts with
2610.TW for China Airlines, the
top carrier in Taiwan which gained almost 15 percent
since last Monday. Sellers controlled the action
today but price was still up over two and half
percent at close March 24.
China Airlines has been planning
since 2000, if not earlier, for direct flights
to mainland China particularly cargo with considerable
investments already in Shanghai. Direct air links
is one of the first integrations expected when
Ma Ying-jeou is inaugurated.
The Hong Kong IPO market is flat
if not dead. Two Chinese firms dropped IPO plans
this week after lackluster interest – Evergrande
Real Estate Group and Wing Fat Printing.
China Meilan Group, a chemical
producer out of Jiangsu province north of Shanghai
is planning an IPO on Hong Kong to raise up to
one billion Hong Kong dollars, around $128 million
US dollars, but not expected until the third quarter
according to the South China Morning Post.
China Life, China’s biggest
life insurance company, invested $300 million
US dollars in the giant VISA IPO on Wall Street
and its stake has gained about fifty percent.
But Ping An Insurance has
not fared so well. The company has now bought
up to half of the Dutch financial conglomerate
Fortis NV and spent almost three and half billion
US dollars. The company is being criticized for
its acquisition binge and its shares fell almost
ten percent today in Shanghai. Wags in the market
are blaming Ping An for Shanghai’s losses overall
as Ping An’s troubles precipitated the current
slide.
CHINESE BEAR
And now for the bad news – Shanghai
and Hong Kong are bearish. The Hang Seng closed
at 21,108 before Good Friday down almost three
and a half percent and back to a plateau around
20,000. The Hang Seng China Enterprise fared worse,
down 5.27%.
In Shanghai the Composite Index
ended March 24 at 3,626.19 down almost five percent
after falling all day. It remains down from the
start of the year and now a bear. The CSI 300
is down almost the same amount and closed March
24 at 3,857. Shanghai Bs are barely up from their
collapse last week, closed today at 259.31. ShenZhen
Bs down again to 544.32 and look stuck around
500.
