Taiwan's stocks may rise to a record after the nation's presidential election in March next year on improved ties with China and an end to political gridlock, according to BNP Paribas SA (
Taiwan's benchmark (TAIEX) stock index should surpass its peak of 12,682 reached on February 1990 "regardless of which party wins," Johnny Chen (陳政隆), head of research at BNP Paribas Securities (Taiwan) Co, wrote in a report dated yesterday. The index's high is 45 percent above yesterday's close.
Democratic Progressive Party (DPP) presidential candidate Frank Hsieh (
"We expect the political paralysis of the past seven years to end after the elections," Chen wrote in the report.
The current situation in which the main opposition party controls the parliament is unlikely to continue, he said.
If the DPP wins the election without getting a majority of seats, it will "have no choice but to form a coalition government" with the KMT to end the gridlock, he wrote.
The KMT ruled until their defeat by the DPP in 2000. President Chen Shui-bian (
"A better domestic political environment will facilitate the passage of key fiscal policies to stem further capital outflow and possibly attract the return of Taiwanese capital overseas," BNP Paribas' Chen wrote.
Capital outflows in the past 15 years are estimated at between US$500 billion and US$800 billion, according to the BNP Paribas report. China is the nation's biggest trading partner and investment destination.
"Taiwan's geographic proximity with China allowed the island to benefit from the mainland's growth," said Phil Chen (
The TAIEX, which gained 2.5 percent to 8,942.93 yesterday, has risen 14 percent this year, compared with a 15 percent gain by the Morgan Stanley Capital International Asia-Pacific Index.
The government, seeking to boost economic growth ahead of the election, is encouraging developers to convert farmland for use as factories and housing.
The government has also announced measures to increase salaries and reconstruct urban housing.
"We like Taiwan, especially Taiwan domestic plays, due to supportive government policies to revitalize the domestic economy," said Diane Lin, Sydney-based head of Asian equities at Perennial Investment Partners, which oversees US$20 billion in assets.