All Eyes on the Taiwanese Stock Market

Taiwanese Stock Market TWSE

The Taiwanese gave China the middle finger over the weekend.

Well, at least the 57% of them who gave anti-China leader Tsai Ing-wen their vote.

This gives her a second term in the office. One of which I’d say didn’t look likely this time last year. More on that shortly…

If you asked me, that’s what I call an up yours to the communist party.

Why should you care about Taiwan?

To be frank, the Taiwanese Island is an island that we don’t want controlled by China.

If it was, then it would give China a very interesting playground. One that could be perfect to protect against military action up through the South China Sea.

That is, of course, if wars in the future are fought the same way they were 100 years ago.

For now, it may be wise for Taiwan to boost their defence on the west coast. Especially through Tainan City and up through Taoyuan City.

There’s a chart you need to see

Anyway, war’s not the main reason why we’re focusing on Taiwan today. It’s their stock market.

If you haven’t seen it, here’s the chart below:

Port Phillip Publishing

Source: TradingView

[Click to open in a new window]

What you’re looking at above is the Taiwan TAIEX. It’s a capitalisation weighted stock index.

This index measures the performance of a handful of stocks on the Taiwanese Stock Exchange. It’s also the most quoted index.

You can consider it the Dow Jones of Taiwan.

The only difference here is that while the Taiwanese Stock Exchange started operating in 1962, the TAIEX only has data going back to 1997.

On the surface, you might be thinking that this is plenty of data.

But as a technical analyst, it’s better to try and source data as far back as you can.

This can help you understand how an economy or country has performed in the past. And how a changing economy has helped boost the stock market.

This could be a reason to be buying

Well, that’s what I want to be seeing anyway.

Scroll back up again and look at the chart if it’s out of your view.

Since 2009, it’s been gradually rising. Those corrections in stock prices you see, well, they’ve been averaging around 21%.

They’ve also occurred roughly every three and a bit years.

This is important because it could be signaling for rising prices. For at least three years from the last low.

Going back to the chart, we can see the last major correction was around 2018.

That put’s 2021 on the cards for a Taiwanese correction.

Of course, I’m just hypothesizing right now. Anything could happen between now and then.

But it may be something to look out for.

That’s especially the case if you’re investing in ETFs which hold Taiwan. Such as the BetaShares Asian Technology Tigers ETF.

That’s an ETF that tracks the performance of an index of the top 50 technology and online retailers across Asia.

Taiwan makes up 21.5% of this ETF.

And with Tsai Ing-wen in office for another term, I have little doubt in seeing Taiwan’s Stock market rallying higher form here.

It’s just something you should be on the lookout for and be aware of.

Of course, there’s tones of other things going on in the background. One being the most obvious, the US–China trade war.

Keep this in mind when looking here

The trade war has been helping Taiwan win back some of their manufacturing base.

One being computer design manufacturer Quanta Computers.

Though, the race back to Taiwan has been slow. I must admit.

It appears companies still prefer cheap labor. And where else would you go in Asia for cheap labor if it isn’t China?

Well, Vietnam.

The Foxconn factory in China was a perfect example of a company looking for cheap labor. Foxconn is the company that assembles the iPhone.

They fled China due to the trade war. At the time it was paying its staff around US$287 a month.

After they moved to Vietnam, staff wages increased to US$340 per month.

If they were to choose Taiwan instead, well, they’d have to pay around US$998 per month.

You get the point here, Taiwan isn’t going to be the destination of choice for companies who are fleeing China and seeking cheap labor.

But for companies who were originally in Taiwan or are Taiwanese owned, this could be reason to return home. Step by step, one at a time.

It’s just something to keep in mind and be on the lookout for. Profits in the Taiwan stock market could be on the cards.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

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