Stable politics to boost investing: report

The nation's investment environment that is vulnerable to political issues is expected to experience brighter prospects this year, given more constructive trends in domestic politics and cross-strait relations, Deutsche Securities Asia Ltd predicted.

"With no major elections in the next three years, we think the political climate will become much more stable," Ken Chen (陳安), equity research chief at Deutsche Securities Asia's Taiwan branch, said in the Taiwan strategy report released last week.

The nation's political landscape changed little after the presidential and legislative elections last year, as the Democratic Progressive Party (DPP) kept control of the executive branch while the opposition parties retained a majority in the legislature.

That situation indicated that people wanted to maintain the status quo, in both domestic politics and China-Taiwan relations, Chen said in the report.

Deutsche Securities also predicted that the upcoming Cabinet reshuffle would be positive on the nation's political dynamics, as incoming premier Frank Hsieh (謝長廷) is expected to work more closely with the opposition lawmakers than his predecessor.

Relations between the executive and the legislative branches of government therefore may improve, the report said, as Hsieh is by nature pragmatic and willing to negotiate with opposition lawmakers to get financial reform bills passed in the legislature.

Deutsche Securities also predicted that Hsieh will be more keen in dealing with China than the previous premier. Further, Beijing is also more friendly towards Hsieh since he is one of the few senior members in the DPP that visited China in the past, the report said.

The agreement on the two-way direct charter flights for the Lunar New Year holiday that began last weekend could also be taken as a hint of more pragmatic cross-strait relations, according to the report.

"The Jan. 16 landmark agreement ? is a testament that both sides are willing to set aside their differences when the occasion demands it," Chen said in the report.

The Macau negotiation that took only two hours to complete signaled the stronger-than-expected willingness of both sides to improve cross-strait relations and implied that dialogue at the higher levels was already taking place, he said.

In this regard, analysts at Deutsche Securities said they would not be surprised if negotiations on direct cargo charter flights start right after the Lunar New Year. Moreover, both sides may want to make charter flights much more frequent, extending such services to Mid-Autumn Festival and other traditional holidays, according to Chen.

Sectors that would benefit from the positive political momentum are the airlines, tourism, retail and property industries, Deutsche Securities said, with top picks including EVA Airways Corp (長榮航空) and Formosa International Hotels Corp (晶華酒店).

Eva and Formosa International shares closed 1.03 percent and 1.8 percent up at NT$14.7 and NT$39.5, on the TAIEX last week, respectively.

For this year, Deutsche Securities predicted that the benchmark index would reach 6,617 points within the next 12 months.