Pro-China politics and the tracking of stocks

President Ma Ying-jeou was “elected” chairman of the Chinese Nationalist Party (KMT) on Sunday with no competitor and 92 percent of about 300,000 votes cast. The following day, Chinese President Hu Jintao, clearly satisfied with the result, broke 60 years of diplomatic ice by sending Ma a congratulatory telegram in which he pompously said: “I hope our two parties can continue to promote peaceful cross-strait development, deepen mutual trust, bring good news to compatriots on both sides and create a revival of the great Chinese race.”

In an article on the Hu letter on Monday, a wire agency added that Ma’s “election” and Hu’s telegram “helped boost Taiwan stocks … which rose 0.79 percent … to end above 7,000 points for the first time in 11 months.”

In recent months, wire agencies and analysts have tended to equate rises in the Taiwanese market with “improved relations with China” and to blame drops on Democratic Progressive Party (DPP) “troublemakers.” A subsequent telephone interview with the agency in question confirmed that the conclusion was based on the assessments of financial analysts working at local and foreign banks.

What the agency failed to say is that on Monday — to quote The Associated Press — “Asian markets extended their winning streak … as hopes company earnings will rebound along with global growth continue to drive investors into stocks.” (Tokyo’s Nikkei 225 stock average rose 144.11 points, or 1.5 percent, to 10,088.66; Hong Kong’s Hang Seng rose 268.83, or 1.4 percent, to 20,251.62; South Korea’s KOSI gained 1.4 percent; and so on.)

What the agency also did not mention was that (a) the Taiwan Stock Exchange opened flat that morning, and (b) investors had known for quite a while that Ma would win the “election.” While recognizing that financial analysts, when contacted by wire agencies, cannot remain silent and must attribute a market’s rise and fall to something, linking Ma’s “election” or the Hu telegram to a 0.79 rise in the local bourse when region-wide macroeconomic factors and agreement on better global economic prospects far better explain the modest rise is dishonest.

The reflex to use cross-strait developments as a proximate cause of stock performance in Taiwan is so prevalent that one wonders if some are not letting agendas interfere with assessments. For example, On Oct. 24 last year, Deutsche Presse-Agentur (DPA) reported that the Taiwan Stock Exchange was down nearly 3 percent as the result of a rally organized by the “right wing” and “separatist” DPP, failing to mention that on the same day, all Asian markets were markedly down: Japan by 7 percent and South Korea by 9 percent, among others.

Then, on Oct. 30, DPA said Taiwan’s bourse was up nearly 6 percent on “positive signs in Taiwan-China ties” ahead of “important dialogue from Nov. 3 to Nov. 7 [a visit by China’s envoy] to discuss expanding ties.” Again, the agency did not say that on the same day the Hong Kong stock exchange was up 12.8 percent, Tokyo almost 10 percent and Seoul 4 percent, while Australia, Singapore and the Philippines added 4 percent or more — developments that had far more to do with macroeconomic factors than cross-strait ties.

It is increasingly evident that big business and financial investors — at least in certain sectors that stand to benefit — favor cross-strait rapprochement, if not eventual unification. By invariably portraying rising stock value in Taiwan as a direct result of Ma’s successes — and conversely, by blaming devaluation on DPP shenanigans — these analysts are politicizing their assessments and undermining their credibility, while helping the KMT and the Chinese Communist Party take Taiwan closer to economic ultradependence and unification.

J. Michael Cole is a writer based in Taipei.

Source: Taipei Times - Editorials 2009/08/01