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Investment hurt by lack of direct links, CLSA says

The lack of direct cross-strait flight and visa restrictions are the two biggest hurdles keeping foreign investors away from Taiwan, Peter Sutton, head of research at CLSA Ltd (里昂證券), told a European Chamber of Commerce Taipei (ECCT) luncheon yesterday.

"Some foreign companies, such as Nokia, said that they will come or relocate more people to Taiwan if the links are in place," he said.

Sutton believes that direct flights will be implemented soon after this month's presidential election -- a big boost to Taipei City's competitiveness.

"Taipei will emerge as a Greater China service hub focusing on corporate head offices, high-tech research and development [centers], conference and creative [industries] as well as medical and recreational tourism," Sutton said, adding that the implementation of direct links will also help leverage Taipei's transport infrastructure.

"We'd like to see Taiwan open its economy to China, which will help revive the local economy," he said, adding that opening up visits by 3,000 Chinese tourists per day will help contribute 1.4 percent of GDP annually to Taiwan.

Sutton praised the quality of living in Taipei by quoting a Mercer Human Resource Consulting report, which ranked Taipei as the world's 48th most expensive city with the 11th-best quality of living for expatriates.

He also quoted a Jones Lang LaSalle Taiwan survey, which found Taipei to be the cheapest city in the world, with grade-A office rental rates falling behind Tokyo, Mubai, Hong Kong, Seoul, Singapore, Shanghai and Ho Chi Minh City.

"But we expect rents to climb substantially over the next two years," Sutton said.

In terms of the nation's stock market performance, CLSA believes the biggest winners from a domestic economic revival would be property, financial and retail companies, favoring large-cap stocks such as Formosa Plastics Corp (台塑), Nanya Plastics Corp (南亞塑膠), Cathay Financial Holding Co (國泰金控), First Financial Holding Co (第一金控) and Chunghwa Telecom Co (中華電信).

Sutton expressed a less-than-optimistic view on the nation's tech shares given that a slowdown of consumer demand in the US and Europe would negatively impact on the nation's high-tech companies.
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