Beijing's announcement over the weekend that it would initiate anti-secession legislation could only have a limited impact on the local bourse and such a negative influence is expected to subside in one to two days, a market watcher said yesterday.
"The news is expected to cause jitters on the local bourse and trigger some selling as soon as the trading session starts [today]," said Wu Pei-wei (吳佩偉), a portfolio manager who manages a US$30 million fund for ABN-AMRO Asset Management in Taipei.
Investors' confidence could be further eroded by a decline in Wall Street trading on Friday, which could cause foreign investors to hesitate to pour money into Taiwan's stock market, Wu said.
China's state media reported on Friday that Beijing will introduce legislation against secession, which was deemed as a move aimed at Taiwan. The draft law will be submitted during a session of China's parliament starting on Dec. 25, the Xinhua news agency said.
Prior to this political shock, the nation's stock market last week rebounded with an increase of up to NT$223.84 billion, or 1.66 percent, in the market value of wholly listed companies, which aggregated NT$13.70 trillion, compared to previous week and following the legislative elections, according to statistics by Taiwan Stock Exchange Corp (TSE).
The benchmark TAIEX closed 9.91 points lower on Friday at 6009.32 with a turnover of NT$60.21 billion. The New Taiwan dollar traded at NT$32.36 against the US dollar on Friday, an increase of NT$0.115 from a week earlier, after foreign investors bought a net of NT$16.2 billion worth of Taiwan's stocks last week.
In the long term, China's announcement is not expected to repress Taiwan's economic growth, an economist at Citibank Taiwan said.
"It will not stop domestic investment by Taiwanese companies that have advantages in global deployment and the flexibility to bolster economic growth," Citibank Taiwan vice president Cheng Cheng-mount (
Despite Beijing's intention to reiterate its sovereignty over Taiwan in the international arena and therefore increase political risks across the Taiwan Strait, Cheng said he doesn't expect the latest cross-strait development to have a major impact on foreign direct investment here.
He said foreign investments in Taiwan already shrank years ago, after they shifted to China, the world's largest manufacturing base today.
Taiwan has received foreign investments of US$2.91 billion in the first 10 months of this year, according to figures by the Investment Commission under Ministry of Economic Affairs.
Foreign investment in Taiwan saw an all-time peak in 2000 of US$7.56 billion, and has followed a downward trend since then, accor-ding to the commission's statistics.
Stable cross-strait relations remains crucial to Taiwan, as Fitch Ratings last week confirmed its A+ sovereign rating for Taiwan and its AA rating for the local currency, citing a positive outcome of the legislative elections with regard to maintaining the cross-strait status quo.
Another international rating agency, Standards and Poors, maintained its negative outlook on Taiwan, citing the nation's weakening fiscal flexibility and rising tensions with China.