The local stock market has been doing well in recent months. I don't believe that this is accidental. In an article entitled "Active management, long live the TAIEX" published in the Liberty Times, the Taipei Times' sister newspaper, on Jan. 5, I analyzed the possibilities for Taiwan's stock market this year.
Perhaps we should thank China for passing its "Anti-Secession" Law, since it forced President Chen Shui-bian (陳水扁) to propose the policy of no opening without effective management last April. As a result, the opening of Taiwan's advanced chip manufacturing, packaging and testing sectors and its petroleum cracking industry, which had been discussed over the past two years, has been blocked.
Although the industries that were deregulated in the "active opening" policy in 2001 are still bleeding, Taiwan's main industries can stay and develop at home, which caused the present bull market, allowing the market to gather energy and recover.
Unfortunately, this positive analysis can hardly be heard due to the bias of the pro-Chinese media. The pro-pan-blue media credit the market's performance to the recent Chinese Nationalist Party (KMT)-Chinese Communist Party Economic Forum, they forget that the run began in October.
The talk of Premier Su Tseng-chang's (蘇貞昌) ability to amend Chen's China policies is ridiculous. March 23, the day the stock market began its rise, was the day Su announced Chen's "active management" policy, which submits major Chinese investment projects to a stricter approval process. Following the logic of their pro-China view, that should have been the beginning of a bearish market, not a bull run.
Generally, two aspects affect a stock market: the fundamental aspect and the information aspect, or investor confidence. Whether Taiwan can keep its enterprises and capital is the key factor affecting the fundamental aspect. Whether the pan-blue camp likes it or not, experience tells us that patience and the "active management, effective opening" policy are the only means to improve fundamentals. For example, the index rose above 10,000 points after the government announced the "no haste, be patient" policy. Without such policies, the index will certainly fall, as happened during the bear market in 2002 and 2003.
The impact of the information aspect on a market is temporary, and it is easily affected by media ideologies or false information.
In normal countries, the fundamental and information aspects are, with the occasional exception, mostly complementary. This is not the case in Taiwan, where the two aspects mostly are contradictory to each other. For media and analysts with a pro-China economic view, "improving fundamentals" and the "no haste, be patient" and "active management" policies are incompatible concepts. Their reports on such policies are negative, and these policies make up the motivation for their prophecies of Taiwan's demise. Instead, they praise any opening of the economy and trade with China, which led to their explanation that the stock market had risen above 7,100 points because of Su's influence. One must not take such talk seriously.
Government officials will hopefully not be misled by the pro-unification camp's interpretation. They should not mistake the information aspect for the fundamental aspect, but continue to concentrate on the expansion of the three small links, the financing of Taiwanese businesses, direct charter flights and other issues capable of extending the stock market's bull run. If they ignore the "active management" policy and rekindle China fever [among the business community], they will fail to improve fundamentals and waste the energy accumulated over the past year. Such matters should be handled with caution.
Huang Tien-lin is a national policy adviser to the president.
Translated by Eddy Chang
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