Since early this year, foreign investors have poured more money into Taiwan's stock market than any other stock market in Asia, with the exception of Japan's. As of this month, foreign investors have contributed over NT$400 billion (US$11.9 billion) to the nation's stock market. This month alone, the influx of foreign capital into the market has reached more than NT$140 billion, a record high for a single month.
Strangely enough, just a couple of weeks ago the nation's pro-China media was warning the government, quoting foreign financial analysts who argued that if the government did not push ahead with opening the three direct links with China and lifting the investment ceiling for Taiwanese companies in China to 40 percent of their asset value, foreign investors would eventually abandon Taiwan for China. They said that it looked as though the nation would go down the tubes if it insisted on prioritizing its sovereignty over everything else.
In fact, foreign investors have yet to withdraw their capital from Taiwan, even though the government has yet to eliminate restrictions on Taiwanese businessmen investing in China or negotiate with Beijing over regular cross-strait direct flights. On the contrary, foreign investors have been putting more money into Taiwan. Last year, foreign investors injected a total of NT$283.9 billion into the nation's stock market. This year, they have already far exceeded that amount. Interestingly enough, between January and August, foreign investors injected US$11.5 billion into Taiwan's stock market; at the same time they only invested US$800 million in South Korea's stock market.
These statistics indicate that although the media believes the nation's economic outlook is dismal, Taiwan is still a top investment target for foreign investors. Evidently, the pro-China media outlets were ignoring the facts and pursuing their own interests when quoting some foreign investors' criticisms of Taiwan's China policy.
If we analyze the portfolios of foreign investors we find that last year they invested NT$283.9 billion in Taiwan Semiconductor Manufacturing (TSMC,
The government has yet to totally lift restrictions on chip companies that want to set up plants in China. Despite this, TSMC, the leading player in the industry, is not being ignored by foreign investors. AUO and China Steel have similar characteristics, for they have both kept most of their production lines in Taiwan.
If foreign investors' criteria for selecting investment targets are based on profitability, we have to consider why the companies willing to stay in Taiwan are proving to be more profitable and able to keep up with industry changes.
There are 694 listed companies in Taiwan. Only one or two companies have continued to perform well after relocating to China. Shares of the majority of companies that have moved to China are trading at or below their face value -- not the sort of thing that foreign investors are interested in.
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