Taiwan’s President Ma Ying-jeou
Aaron Tam/AFP/Getty Images
Taiwan President Ma Ying-jeou speaks to supporters after voting results showed he won the reelection at his campaign headquarters in Taipei on Jan. 14, 2012.
Taiwan President Ma Ying-jeou speaks to supporters after voting results showed he won the reelection at his campaign headquarters in Taipei on Jan. 14, 2012. Photographer: Aaron Tam/AFP/Getty Images
Jan. 13 (Bloomberg) — Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace and formerly head of the American Institute in Taiwan, the de facto U.S. embassy, talks about Taiwan’s presidential election and its implications for the island’s relations with China and the U.S.
Financial assets have rallied in the island before tomorrow’s contest between President Ma Ying-jeou of the Kuomintang Party, who has championed closer ties with China, and Tsai Ing-wen, chairwoman of the opposition Democratic Progressive Party. Paal speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)
Jan. 16 (Bloomberg) — Charles Morrison, president of the East-West Center, talks about the re-election of Taiwanese President Ma Ying-jeou and its implications for the island’s relations with China.
Morrison speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)
Jan. 16 (Bloomberg) — Bloomberg Television’s Stephen Engle reports from Taipei on Taiwan’s presidential election.
President Ma Ying-jeou was elected to a second four-year term, giving him a renewed mandate to press for closer ties with China that have eased decades-old tensions across the Taiwan Strait. (Source: Bloomberg)
The re-election of Taiwanese
President Ma Ying-jeou, a booster of closer ties with China, is
bullish for the island’s financial markets, according to Bank
Julius Baer Co., Citigroup Inc. and Uni-President Assets
Management Corp.
Julius Baer, which oversees about $205 billion in assets,
is re-evaluating its “underweight” rating on Taiwanese
equities and may buy airlines and hotel stocks, Lee Boon Keng,
head of the firm’s investment solutions group in Singapore, said
by phone yesterday. JPMorgan Chase Co. upgraded Taiwan’s
shares to “neutral” from “underweight.” Two-year bonds may
rally as overseas investors buy Taiwan dollar assets, said
Samson Tu, a Taipei-based fund manager at Uni-President.
The Taiex Index, the island’s benchmark stock gauge, fell 1
percent to 7,106.83 as of 11:13 a.m. local time, as European
debt concerns dragged the MSCI Asia Pacific Index (MXAP) down by 1.3
percent. The gauge rose as much as 1.1 percent. Taiwan’s dollar
was little changed at NT$30.019 against its U.S. counterpart
from NT$30.0 on Jan. 13, according to Taipei Forex Inc. It
advanced 0.1 percent earlier.The yield on 1 percent notes due
January 2017 fell one basis point, or 0.01 percentage point, to
0.959 percent, prices from Gretai Securities Market show.
“In Ma’s second term, we could see not only continuation
but probably an acceleration of cross-strait economic links and
that will certainly be positive for the market,” Peter Kurz,
Citigroup’s head of Taiwan research, said in a telephone
interview yesterday. His team was ranked first for Taiwanese
research by Institutional Investor from 2008 to 2010.
Closer Ties
Ma, the 61-year-old leader of the ruling Kuomintang Party,
won a second four-year term after defeating Tsai Ing-wen,
chairwoman of the Democratic Progressive Party, in Jan. 14
elections. Ma’s first term was characterized by the pursuit of
closer ties with China through trade agreements and the ending
of a six-decade ban on direct air, sea and postal links.
China regards Taiwan, ruled separately since the end of a
civil war in 1949, as its own territory and mainland officials
had warned that relations would suffer if Tsai won the weekend
election. The DPP’s Chen Shui-bian had pushed for Taiwan’s
recognition as a sovereign nation during his presidency that
ended when Ma took office in 2008.
Ma won 51.6 percent of the votes cast to Tsai’s 45.6
percent, Taiwan’s Central Election Commission reported on its
website. The commission said 74.4 percent of 18 million eligible
voters cast ballots.
Bullish Bets
Options traders already anticipated Ma’s victory, placing
increasingly bullish bets earlier this month on an exchange-
traded fund tracking Taiwan stocks. The ratio of calls to buy
the iShares MSCI Taiwan Index Fund versus puts to sell rose on
Jan. 6 to the highest level since March 2008, two months before
Ma was sworn in for his first term.
The Taiex reached an eight-week high on Jan. 11. The local
dollar touched NT$29.880 on Jan. 12, the strongest level since
Nov. 1. Benchmark 10-year bond yields declined two basis points
last week to 1.29 percent, the lowest level among emerging
markets. Five-year yields dropped three basis points last week.
“Ma’s win has eliminated worries and uncertainties in the
bond market,” Uni-President’s Tu, who helps manage $1.6 billion
of fixed-income securities. said by phone yesterday. “Two-year
bonds may rally as foreign investors may buy Taiwan dollar
assets to profit from a currency rally.” His firm is a unit of
Uni-President Enterprises Group, Taiwan’s biggest food company.
Foxconn’s Gou
There was no trading on two-year securities today,
according to data compiled by Bloomberg. Two-year bond yields
fell three basis points last week to 0.79 percent, the best
five-day performance since the week ended Dec. 16.
Ma was backed by Taiwanese executives who have said his
cross-strait policies have boosted investment and helped the
island’s economy grow. Terry Gou, chairman of Apple Inc.
supplier Foxconn Technology Group (2317), predicted in a Jan. 14
interview with local television station TVBS that a Ma victory
would cause a stock rally today.
The Taiex Index (TWSE) has matched the performance of the MSCI
Asia-Pacific Index under Ma’s rule, whereas it lagged behind
under Chen. Since Ma became president, the Taiwanese gauge is
down about 23 percent, against the 25 percent drop for the MSCI
measure. During Chen’s presidency, the Taiex rose 1.9 percent,
while the regional index climbed 35 percent.
Fubon Financial
China and Taiwan signed an economic cooperation agreement
in 2010, paving the way for the island’s financial services
companies to expand their businesses on the mainland. Taipei-
based Fubon Financial Holding Co. (2881), Taiwan’s second-largest
financial services company, lost 3 percent as of Jan. 13 since
Ma’s inauguration on May 20, 2008, less than the Taiex index’s
23 percent slump. Fubon dropped 0.6 percent today.
The removal of travel restrictions helped the number of
Chinese tourist arrivals to jump 68 percent to 1.63 million in
2010, overtaking Japan as Taiwan’s biggest source of visitors.
Shares of Formosa International Hotels Corp. (2707), Taiwan’s
largest hotel operator, retreated 4.9 percent as of Jan. 13
since Ma’s inauguration. The Taipei-based company’s shares,
which lost 0.3 percent today, are valued at 26.3 times estimated
profit, compared with the Taiex’s multiple of 12.8. Fubon
Financial trades at 10.6 times.
Farglory Land Development Co., the largest construction
company in Taiwan, gained 1.2 percent to NT$50.80. Cathay Real
Estate Development, the second-largest, advanced 3.5 percent to
NT$10.45, poised for the biggest increase since Dec. 23.
Clear Outcome
Property stocks are poised for a short-term rally after
Ma’s victory as the DPP may have taken steps to lower real-
estate prices had it won power, Dave Chiou, a Citigroup analyst,
wrote in a report yesterday.
“The fact that the outcome is clear, the KMT not only won,
but with a convincing majority, clearly it will allow for a
fairly strong market rally in the short term,” said Citigroup’s
Kurz, who is favoring technology companies. He’s maintaining his
target for the Taiex to rise to 8,200 this year, 14 percent
above last week’s close.
China’s Taiwan Affairs Office said in a statement issued
through the Xinhua News Agency that Ma’s victory shows that the
“peaceful development of cross-straits ties” in the last four
years was “the correct path that has won the support of the
majority of the Taiwanese compatriots.”
Financial markets slumped after the DPP’s Chen won the
presidencies in 2000 and 2004. The Taiex fell 9.4 percent in the
two days following his second victory, after he was shot while
campaigning in his hometown of Tainan. The government bought
stocks and the currency to stem losses.
‘A Rat’
A government-backed stock stabilization fund also supported
the market in March 1996 when China test-fired missiles within
about 30 miles of Taiwan’s two biggest ports in an attempt to
intimidate people to vote against former President Lee Teng-hui,
who published a state-to-state relations doctrine that led China
to brand him “a rat.”
Europe’s debt crisis may still drag on Taiwanese equities
in the next 12 months, said Jessie Zhang, manager of the Polaris
Taiwan Top 50 Tracker Fund, the island’s largest fund.
“We are still an export-oriented economy,” Zhang said by
phone from Taipei yesterday. “Ultimately, if the euro-zone
crisis were to continue, any stock gains will be limited.”
Global equity markets lost more than $6 trillion in value
last year as Europe’s debt woes and slowing economic expansion
worldwide weighed on investor demand for riskier assets. Morgan
Stanley said in a report on Jan. 13 Taiwan’s stocks will be
“susceptible” to declines whatever the outcome of the
elections this weekend as global economic concerns remain.
Stronger Finances
Taiwan’s dollar, the second-best performer in Asia in the
past three months, advanced 0.3 percent in 2011, a third year of
gains as investors favored economies with the strongest finances
as Europe’s crisis worsened. The island’s debt is 33 percent of
gross domestic product, half the ratio of the U.S., and its $386
billion foreign reserves are the fifth largest.
“In the long run, the continuation of Ma is positive for
the country and the region; the economic cooperation between
China and Taiwan should continue to develop,” Wee-Khoon Chong,
a Hong Kong-based fixed-income strategist at Societe Generale
SA, said by telephone yesterday. “The near-term optimism and
long-term prospects are both positive for the Taiwan dollar.”
Chong recommends taking a long position on the currency
versus a basket split between the U.S. dollar and the yen. A
long position profits when an asset rises in price.
Ma’s election victory is conducive to the economic
development of the island and China, Justin Lin, the World
Bank’s chief economist, said in Beijing yesterday.
Largest Trading Partner
China passed the U.S. as Taiwan’s largest trading partner
in 2002. Two-way trade reached $160 billion last year, according
to Chinese customs statistics, a 10 percent increase from a year
earlier. Under the first trade accord signed by the two sides in
2010, China agreed to open markets in 11 service sectors such as
banking and to cut duties on Taiwanese imports worth $13.8
billion in 2009, or about 16 percent of the total.
Exports rose 0.6 percent from a year earlier in December,
the slowest pace in 26 months, finance ministry data show. The
central bank left its benchmark rate unchanged at 1.875 percent
for a second straight quarterly meeting last month. The
government cut its 2011 economic expansion forecast to 4.5
percent and said growth will slow to 4.2 percent this year,
after a 10.7 percent expansion in 2010.
Ma’s election victory “certainly will have a positive
impact given what the Taiwanese have voted on really is to have
a closer relationship with China,” Julius Baer’s Lee said.
“Had the DPP won, it would be a destabilizing development. This
is a step in the right direction.”
To contact the reporters on this story:
Weiyi Lim in Singapore at
wlim26@bloomberg.net;
Andrea Wong in Taipei at
awong268@bloomberg.net.
To contact the editors responsible for this story:
Darren Boey at
dboey@bloomberg.net;
Sandy Hendry at
shendry@bloomberg.net.
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Article source: http://www.bloomberg.com/news/2012-01-15/ma-victory-seen-boosting-taiwan-markets-as-baer-considers-upgrading-stocks.html
