In an economic climate haunted by the US recession, soaring oil prices and soaring inflation, Taiwan seems to be sticking out in the crowd. As stock markets dip round the world, Taiwan's Taiex index appears to have an exceptional power to defy gravity. Since his landslide victory in the March election, Ma Ying-jeou seems to have pulled Taiwan out of its nine-year economic stagnation....Maddog alerted me to this piece of either supreme incompetence or witting propaganda -- take your pick -- and passed me a link to the TSEC Weighted Index. Above is the picture for the last three months. Note the anomalous peak on May 19-20, the day Ma was sworn in. Since then, except for the minor recovery a couple of days ago, it's been nothing but downhill -- lower than under the last few months of Chen Shui-bian, continuing a trend that began a couple of months ago.
Nine-year stagnation? We are now in our 28th straight month of expanding exports, and growth last year ran at 5.7%. UPDATE: First quarter of this year, growth was 6.06%. The investment firm UBS notes of this year:
UBS, the world’s largest manager of private wealth assets, said yesterday the economy would reap benefits from the arrival of Chinese tourists starting on July 18, but it might not be the economic godsend many have hoped for.
“Even if 10,000 Chinese were allowed to visit a day and spent NT$15,000 each during their stay, it would only raise the nation’s GDP by 0.5 percent,” said Kevin Hsiao (蕭正義), a chartered financial analyst at USB Wealth Management Research Taiwan. “But the public sentiment here is that they will bring in a huge fortune and fix the economy.”
Under the agreement between Taiwan and China, 3,000 tourists will be allowed per day.
Hsiao was optimistic about the economy, however, and raised his forecast for economic growth from 4.1 percent to 4.5 percent for this year, citing the the nation’s better-than-expected performance in the first five months.
In other words, Ma has rescued our economy by lowering year on year growth from 5.7% to 4.5%, and making the stock market fall. But why let reality intrude on cheerleading?
Once again, the nation's problem isn't economic performance, but economic inequality. That is a growing structural feature of our economy that the KMT is unlikely to address.
On a personal note, we went out this week and bought bikes for ourselves. Interestingly, we visited several shops and they all said the same thing. Thanks to rising gas prices and rising recreational use, demand for bikes is high, and they are having trouble maintaining inventory levels.
[Taiwan]
I want to see the market's reaction to that Kinmen demilitarization comment...
ReplyDeleteDuring the election, I often wondered how the Taiwanese could be so dense about not knowing what is happening in the global economy. When Mr. Ma came out with his naive 6-3-3 formula, I thought, jeesh, are kmtards here REALLY that stupid? Now I think the light bulb is finally flickering in their numbskulls and they are realizing they've been duped. Their all-consuming hatred of CSB caused their emotions to get the better of them.
ReplyDeleteBTW, An interest stat I just read this morning is that the price of oil/gas in China was just raised by 16%. (approx .42 a gallon). It's being discussed in this thread in the forums* of my fav economic site Market-Ticker. (Mish is also a good read.)
This tidbit was posted by one of the forum members. It's an unsubstantiated rumor, but hey, something to think about..
A friend of mine heard from a colleague working as an engineer in Beijing. Apparently the media is not reporting the full magnitude of the problem over there. According to him there is no diesel fuel available at all. Buses and trains have come to a standstill and air traffic has been curtailed. He can't get a flight out of Beijing and is worried about getting stuck there. His bank shut it's doors after experiencing a bank run, he said, and now he can't cash his paycheque. People were gathering in front of the bank smashing against windows and doors using shoes and purses.
Malaysia also stated a few times they may go bankrupt if they have to keep subsidizing oil.
Lastly, I have become more and more convinced that trouble with the FED and Wall St. Investment banks will eventually be the downfall of free Taiwan. (severe austerity in the USA leading to withdrawal of military bases. The bases in Japan will probably stay, but maybe in Korea they will shut down shop.) Just a guess, I know. The problems with the banks is the root cause of global inflation.
*In the Market-Ticker forums, I like to read the Rumors and Breaking News sections. Some good stuff can be found there everyday.
During the election, I often wondered how the Taiwanese could be so dense about not knowing what is happening in the global economy.
ReplyDeleteMe too, especially since so many of them work in it. But I think maybe the price controls actually allowed them to think it wasn't going to hit them all so hard.
Michael
I would say that China is in the same boat, though in much more treacherous waters as far as economic inequality. I was just traveling in Guangxi province, and the complaint I heard most (nothing about Taiwan), was the job opportunity situation, yes, how hard it is to find a job. It struck me that everytime we hear about how good China's economy is doing, the analyst making the claim is just taking into account a small sliver of the country. Now, the government there is certainly trying to expand the wealth of the coastal cities, but they have a long way to go. I guess Taiwan's growth figures are also based on less than a handful of cities, and China is a much bigger entity, but to say that China's economy is just sparkling is to only look at part of the picture.
ReplyDeleteThe other thing everyone is ignoring is that Chinese tourists are coming in groups only. They are not allowed to just walk around on their own or to come to Taiwan individually.
ReplyDeleteThis means that all of their spending is going to be completely concentrated in a few areas. The biggest winners are the tourist agencies, the airline companies, the famous hotels and shopping sites in a few key places (Taipei 101, Taipei, Alishan, Kaohsiung, ...). Some of the poorest counties--Miaoli, Yunlin, non-Alishan/Sun Moon Lake areas of Jiayi and Nantou--they aren't going to share in the tourism boat at all. What about Penghu? I didn't see any of the government suggested routes include Penghu--only circling Taiwan Island itself.
The other thing that is ignored is direct flights will make it easy to spend in China as well. How much future lost revenue will be attributable to Taiwanese deciding that they will go shopping and clubbing and drinking in Shanghai instead of Taipei? It's not clear that the flow is an overall net positive in Taiwan's favor.
Last, cargo flights are being delayed because Taiwan has world-class freight companies in Yang Ming, EVA, and Wan Hai. If they have direct connections to China, they will outcompete China's own transportation companies in the into China leg.
China is getting what it wants--is Taiwan?
Good comments, anon. As for the question, "China is getting what it wants--is Taiwan?" I think it is the same for China: certain groups and industries will benefit. I think the tourism industries on both sides stand to benefit. Certain elite tourists will get to find out if the women at Alishan really are as pretty as water, but most people in China will not likely have any more opportunity to step foot in Taiwan.
ReplyDeleteThanks for this. As I have noted many times before, the SCMP generally publishes crap when it comes to Taiwan. Except for the occasional opinion piece, they follow the KMT line.
ReplyDeleteI wonder if the Taiwanese think that Ma has rescued the economy. If they do, I would be concerned. Things can't have gotten better so soon, and all of the economic indicators say that they have gotten a little worse.
It just dawned me that some of the misconception in Taiwan regarding China's boisterous economy may be due in part by the Chinese Taiwanese people come in contact with.
ReplyDeleteTaiwanese who go to China are mostly:
a. Business people/managers who are dealing primarily with government officials and other owners of enterprise, or rather, middle class Taiwanese are in contact with their financial counterparts who are China's yuppie upper class.
b. Tourists who are wealthy by Chinese standards and travel to China, living as far as their NT will carry them, which allows them 5 star treatment and puts them well out of reach of China's great unwashed masses.
Of course they're going to have a rosy image of the economy.
Me too, especially since so many of them work in it.
ReplyDeleteI work with managers and employees in the mutlinationals all over Taipei in every major business sector. Economy is one of our most common discussion topics, and not a single one of my clients believed the economy was in trouble.
However, the people around me who did believe it were blue-collar workers, the unemployed, kids in their early 20s, and the elderly.
Michael, was there any demographic breakdown of who voted for Ma?
Yup, should have sold my position on EWT (on the NYSE) before Ma came in. Should have listened to the old saying, "buy the rumor, sell the news."
ReplyDeleteWait...business managers and owners represent middle-class Taiwanese? Time to move to Taiwan.
ReplyDeleteHere's something from forbes, though I haven't read it yet:
ReplyDeletehttp://www.forbes.com/opinions/2008/06/05/taiwan-rich-predict-oped-cx_rf_0605flannery.html
It mentions the tourism crap.
Stock market prices are an extremely poor way of measuring an economy. They fluctuate wildly, even in the absence of underlying economic issues.
ReplyDeleteI work with managers and employees in the mutlinationals all over Taipei in every major business sector. Economy is one of our most common discussion topics, and not a single one of my clients believed the economy was in trouble.
ReplyDeleteReally, I hope they have their long positions covered. I still call Taiwan stock index to 6000 (I made this call way before Ma was elected and regardless who won the Taiwan election) by the beginning of next year. We will see if I am wrong or not.
Arty, if you're that sure then why aren't you shorting the market with a sizable chunk of your own assets?
ReplyDeleteYeah Mark, right on. I hate when people talk stocks, but aren't willing to bet.
ReplyDeleteArty, if you're that sure then why aren't you shorting the market with a sizable chunk of your own assets?
ReplyDeleteI am, I think I posted in the Peking duck website stating I am shorting using short ETF (that's SDS and SKF). Someone told me to short Fedex and UPS few month ago, but I didn't listen to him :(...but SKF is a winner! My current asset allocations are 50% cash and 50% short! No commodity! I will convert to long on finance ETF in December or January if I see things picking up.