Despite recent rhetoric that the “520 Curse” — so called because the TAIEX has dropped significantly on every May 20, the date Taiwan’s presidents are inaugurated, in recent years — failed to materialize this year, the TAIEX did in fact fall by 55.85 points to close at 8,837 on that day. Over the past three years, government officials and the media have waxed lyrical about how the government has stabilized cross-strait relations and how much the “peace dividend” will reinvigorate the economy and boost the stock market. The markets, however, continue to tell a somewhat different story. When compared with the emerging stock exchanges in Asia, the TAIEX has performed the worst.
For example, the South Korean Stock Exchange (KRX) closed at 1,885.37 on May 19, 2008 and at 2,111.50 on May 20 last year. This represents an increase of 11.99 percent in the same period that the TAIEX fell by 4.92 percent. The financial crisis hit both countries, but South Korean investors still made money. The same could not be said for investors in Taiwan, who were holding out — in vain, we now know — for “Ma’s Magic” and the “ECFA effect” to kick in, expecting the TAIEX to top 10,000 points by now. It is interesting to note that had the TAIEX performed as well as the KRX over the same period it would now stand at 10,490 points.
If we look at the performance of Southeast Asian countries, the comparison is even starker. In the same period the Thai Stock Exchange rose 23.27 percent from 870 to 1,073, the Philippines Stock Exchange climbed 48.92 percent, from 2,877 to 4,285 and the Indonesian Stock Exchange went from 2,510 to 3,873, an increase of 54.33 percent.
So why is it that Taiwan’s stock exchange is performing so comparatively poorly? The answer quite simple: It is because Taiwan has been paying “peace dividends” to China for so long.
What is the actual scale of these dividends that Taiwan has been handing over to China in he past three years? You just need to look at the 102 percent increase in investment that Taiwan made in China last year, to US$12.23 billion, with a further increase of 33.29 percent from January to February. These figures do not include the money spent on down payments for the Economic Cooperation Framework Agreement (ECFA).
If the government does not restrict the types of permissible investment in China, and allows 20 or so overseas listed companies, including Taiwanese-owned firms listed abroad, to issue Taiwan depository receipts in Taiwan, each company will be able to make off with hundreds of millions of New Taiwan dollars.
Why kill the golden goose? Foreign investment in Taiwan is down 20 percent and now stands at only US$3.8 billion. It is ridiculous to imagine that we can rely on the ECFA alone to increase foreign investment at home.
In contrast, China has only invested US$133 million in Taiwan, and sent about a million tourists. The government is touting the fact that last year Chinese tourists spent almost US$2 billion in Taiwan, but about 5.5 million Taiwanese tourists went to China in the same period. The government has shot itself in the foot, gaining so little in return and putting so much at risk, not least our national sovereignty.
When the recent WHO memo scandal was revealed, the stock market took a beating. It would have been amazing if it hadn’t.
Many pro-China commentators would have us believe that with the ECFA, Taiwan will become a way into China for other countries and some kind of regional center. I urge all those who invest in the stock market to pay these commentators no mind. Such a contention is as ridiculous as suggesting that Penghu could become a trade link between China and Taiwan, or a cross-strait logistics center.
Huang Tien-lin is a former national policy adviser.
TRANSLATED BY PAUL COOPER
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