It's too soon to start celebrating a bull market

Meanwhile, Taiwan must raise capital, construct costly plants, and then produce on an OEM basis for firms that have a strategic alliance with it.

While the public is ecstatic about Taiwan's continued high manufacturing competitiveness in the international market, they seem to have forgotten that companies in Taiwan must bear the risk of building production plants that cost up to NT$100 billion.

Product cycles are becoming more and more rapid, and if a company fails to get a product out at the right time, it won't be the innovator of the technology who suffers, but rather the producer holding the massive investments that will go bankrupt.

It is doubtful that most investors have considered that the high returns on stock in these industries are a far cry from the risks associated with them.

The present bull markets of Taiwan and China do not signify a reduction in cross-strait tensions.

Then there is the fact that Russia recently delivered an advanced Sovremenny-class destroyer to China, and weapons sales to China and Taiwan have increased tensions between China, Taiwan and the US.

The war of words surrounding President Lee's Teng-hui's (李登輝) "two-state" comments and the concept of "one country, two systems" has also contributed to regional instability.

The Asian financial crisis of 1997 signalled that the political control of natural resources has come to an end. Developed countries' new strategy for exploiting the resources of developing nations is to depend on finance, which is just as effective a method of control.

While developed countries sing the praises of financial liberalization, speculative money flows from those countries have again and again come into developing markets with devastating effects.

Central Bank Governor Perng Fai-nan (彭2a南) said that Asian markets have been "bought out" by foreign capital since the end of last year.

Analysts in Taiwan expect between US$20-40 billion in foreign investment to flow into Taiwan within the year, as a result of the raising of the MSCI.

Champaign corks may be popping as a result of the TAIEX breaking the psychological 10,000 barrier, but as for hopes that the bourse will continue to rise to 12,000 or 15,000, we should remember the experience of other countries subject to large and rapid influxes of foreign capital.

Mahavira is a deputy manager at Truswell Securities Investment Trust Co.