All the signs suggest that Taiwan’s economy, under the stewardship of President Ma Ying-jeou (馬英九), is on the brink of collapse. The TAIEX has been behaving particularly strangely, as if trying to tell us something.
It fell by almost 100 points soon after opening last Thursday, despite no significant bad news from around the world that would precipitate such an adverse reaction. By closing, it had recovered to 6,982 points, which, while an improvement, still represented a fall of 50.1 points, or 0.71 percent. Compared with other Asian markets — South Korea sliding 5.03 points (0.37 percent); Japan falling 57.59 points (0.66 percent); the Philippines down 2.28 points (0.05 percent) — the TAIEX was again the weakest in East Asia.
The vulnerability of the TAIEX has been apparent over the past couple of months compared with other East Asian exchanges’ performances after they all hit a low on Sept. 26 — the height of the EU debt crisis. While the TAIEX has recovered by only 1.5 percent (increasing from 6,877.12 to 6,982.90), South Korea’s market has recovered by 15.7 percent, the Philippines’ by 15.9 percent and Thailand’s by 16.1 percent. Even Japan recovered by 3.5 percent.
The comparison makes for uncomfortable reading. Of all the East Asian stock markets’ poor showing in the wake of the European debt crisis, then, Taiwan’s has fared the worst.
The problem is even starker if one looks at it in terms of Ma’s time in office. On May 19, 2008, before he took office, the TAIEX stood at 9,295 points. Yesterday, it closed at 6,922.57. Far from being able to show any discernible progress, the past four years have actually seen a drop of 25.5 percent in the stock market. In the same period, South Korea’s stock market has risen by 1.4 percent, the Philippines’ by 49.88 percent and Thailand’s by 20.56 percent, while Indonesia’s market showed the most impressive increase, 50.34 percent.
The government can no longer point to the 2008 financial crisis to explain this state of affairs. The problem clearly has more to do with how Ma’s team is governing the country and the direction in which they are taking it.
Taiwan’s economic monitoring and leading indicators have been falling for 20 consecutive months, with the monitoring indicators starting to flash “yellow-blue” on the Taiwan Institute of Economic Research’s scale, suggesting that the economy is approaching a slowdown. In October the money supply measure in the market exhibited a black cross, which might lead to a temporary shortage of capital. The TAIEX’s poor performance last Thursday seems to be telling us that the overall economic framework has finally had enough, after three years of engaging with China according to policy and the magnetic effect of the market over there. These factors have led to the hollowing out of industry and the possibility of economic collapse.
Faced with these warning signals, what is the government, at this precise point in time, thinking? Perhaps it is intentionally suppressing the economy as the year closes, holding out for a sudden prodigious bounce-back in the stock market in the two weeks preceding the presidential election. The impressive figures would simply show a significant improvement in relation to an initially dire situation.
It would not be the first time the KMT government has resorted to such measures. It would be a repeat performance of last year’s miraculous economic growth rate of 10.72 percent, when in fact the average GDP for the previous three years had only been 3.21 percent. The 10.72 percent growth was compared with a low starting point. This was done to pull the wool over the eyes of the electorate. The question is, are voters going to fall for it?