The plunge in the local stock market on Friday, with the TAIEX falling below its 10-year moving average of 7,800 points, indicates three troubling messages.
First, investors have turned bearish on Taiwan despite the government’s renewed pledge of new economic stimuli. Second, the more than 20 percent decline in the market over the past four months represents a vote of no confidence in the Chinese Nationalist Party (KMT) government. Third, the continued losses from stock investments by the pension fund for retired public servants — military personnel, civil servants and public school teachers — and the labor insurance and pension funds pose a direct threat to everyone’s retirement plans, regardless of whether they have equities.
This is a crisis. A crisis for market sentiment, and a crisis of the public’s confidence in Taiwan.
The bad news, such as it is, is that there is slim chance of getting out of this dismal situation soon, given the current global and domestic economic uncertainties.
Some have said that Taiwanese should put aside the critical and polarized rhetoric of the past several years and focus, for as long as possible, on what matters: improving the investment environment in a way that helps prepare the nation’s children for the future.
Indeed, the government on Thursday unveiled its latest stimulus measures to shore up the export-reliant economy after the nation’s GDP weakened significantly last quarter. However, investors’ rush to dump shares the very next day indicated that they expect no good news in the short term from the government’s new initiatives, which focus mainly on structural reforms in the economy and will take time to create results.
Meanwhile, the Executive Yuan last week announced a 13.1 percent increase to next year’s government budget for public spending on infrastructure to NT$359.6 billion (US$10.9 billion), and the daily limit on Chinese individual visitors next month is to be expanded to 5,000 from the current 4,000 per day, as the government expects to rely more on domestic demand to help drive economic growth, in contrast with an export slowdown.
However, the impact of expansionary fiscal policy is not likely to take effect immediately either, because the government budget is only to be implemented from the beginning of next year. Furthermore, it is questionable whether a tourism policy that aims only to increase the volume of tourists to Taiwan, rather than drawing travelers with stronger spending power, can really benefit the domestic services sector.
It is little wonder that investors have largely deserted Taiwan, because the KMT government’s policies are nothing but recycled ideas. Some investors have complained about the higher tax burden, an issue the government is moving to address, while others have already reallocated their investment portfolios to higher-yielding assets abroad.
The latest central bank tallies showed that Taiwan registered a net outflow in its financial account for the 20th consecutive quarter in the second quarter, with a deficit of US$15.3 billion. Apparently, a lack of investment tools at home helped drive funds abroad, but this has raised particular concern of a further exodus of funds at a time when the domestic economy has been slowing down.
There is a saying that the stock market serves as a window into a nation’s economy. Taiwan’s stock market performance has been the weakest among all Asian countries this year, leaving many wondering whether this means the state of the nation’s economy will be the worst in the region this year. If the domestic property market also slows down and becomes dormant and there is no substantial pickup in global growth this year to offer some support to Taiwan’s export and manufacturing sectors, it might be time for everyone to prepare for tougher days ahead.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry