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.
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
If you had a vision of the future where China did not dominate the global car industry, you can kiss those dreams goodbye. That is because US President Donald Trump’s promised 25 percent tariff on auto imports takes an ax to the only bits of the emerging electric vehicle (EV) supply chain that are not already dominated by Beijing. The biggest losers when the levies take effect this week would be Japan and South Korea. They account for one-third of the cars imported into the US, and as much as two-thirds of those imported from outside North America. (Mexico and Canada, while
I have heard people equate the government’s stance on resisting forced unification with China or the conditional reinstatement of the military court system with the rise of the Nazis before World War II. The comparison is absurd. There is no meaningful parallel between the government and Nazi Germany, nor does such a mindset exist within the general public in Taiwan. It is important to remember that the German public bore some responsibility for the horrors of the Holocaust. Post-World War II Germany’s transitional justice efforts were rooted in a national reckoning and introspection. Many Jews were sent to concentration camps not
RSS