20101107 Serving up Taiwan on a platter

Serving up Taiwan on a platter

By Huang Tien-lin 黃天麟

Another stock market myth is being created as pro--Chinese stock market wizards say Taiwan’s benchmark stock index, the TAIEX, is set to reach 8,395 points before the upcoming special municipality elections, linking this bullish view to the cross-strait situation and the “Economic Cooperation Framework Agreement (ECFA) effect.”

The purpose of such talk is of course to talk up the pan-blue camp’s chances in the run-up to the elections. This is entirely bogus. So what if the TAIEX were to reach 8,395 points, which was the highest point reached this year, on Jan. 15? Let’s take a look at some hard figures.

Over the year, the TAIEX has fluctuated between 7,000 and 8,300 points. Despite the aid of improved cross-strait relations and the ECFA, Taiwan’s stock market is still the worst performer of the Four Asian Dragons. By Nov. 3, the benchmark indices had increased by 15.04 percent in South Korea, by 11.47 percent in Singapore and by 10.2 percent in Hong Kong, while the TAIEX had increased by just 1.29 percent.

If we look a bit further back, the performance of the stock market performance since the election of President Ma Ying-jeou (馬英九) has been even worse, as the TAIEX closed at 8,834 points on May 19, 2008, the day before Ma’s inauguration. All the talk about the TAIEX reaching 10,000 points as soon as Ma took office or of even 20,000 points being conceivable is now history, presumably never to be heard of again. Over this period, the TAIEX has actually lost 6.12 percent, which, compared with an increase of 5.19 percent in South Korea over the same period, an increase of 3.45 percent in Singapore and a loss of 2.46 percent in Hong Kong, is pretty embarrassing.

The question is, if the TAIEX really does surge past 8,395 points, and maybe goes on to reach 9,000 points, should this then be praised as a political achievement by the Ma administration or should it be chalked up to the positive effects of the ECFA? Absolutely not. If the TAIEX is to compare with the South Korean stock market, it would have to reach 9,400 to 9,500 points. Or, to be more exact, 9,419 if we take the 8,188 points on which the TAIEX closed last year and multiply it by the 15.04 percent growth seen on the Korean bourse this year, or 9,356 if we use the figures for the close of business on the TAIEX on May 19, 2008. During this period, the Thai stock market grew by 38 percent, despite the impact of the “Red Shirt” movement. To compare with that, the TAIEX would have to rise to 12,000 points.

The question has to be that, given the supposed benefits of the ECFA and improved cross-strait relations, why is export growth, economic growth and stock market performance in Taiwan unable to compare to that in South Korea, which has none of these “advantages?”

Do Taiwanese lack the talent, or are they not sufficiently energetic? This is clearly not the case. If we look at international competitiveness rankings, Taiwan ranks above South Korea, and at the recent International Trade Fair for Ideas-Inventions-New Products in Nuremberg, Taiwan won the team championship.

Nor is it a matter of domestic squabbling, because the government holds an absolute legislative majority and thus has a complete hold on power.

Why have the supposed benefits of improved cross-strait relations, the financial memorandum of understanding with China or the benefits that China forsook for the benefit of Taiwan in connection with the ECFA early harvest, been unable to kick-start the economy or the stock market?

The problem is that acceptance of the “benefits” brought by cross-strait peace is the price Taiwan must pay for cross-strait peace, the financial memorandum of understanding is actually a Taiwanese financial contribution to China and acceptance of the ECFA benefits forsaken by China is Taiwan’s fee for permanent ECFA membership.

In the ongoing process of marginalization between China at the center and the much smaller economic entity of Taiwan, the latter is served up on a platter to China through the inexorable operations of the market. The greater the economic flow, the more exhausted the Taiwanese economy and the weaker the stock market.

Huang Tien-lin is a former national policy adviser to the president.