Ma Administration takes steps to goose the stock market ahead of the election

The Ma government took two steps aimed at pushing up Taiwan's fading stock market ahead of the election this week. First, as AP notes in WaPo, the government is allowing Chinese banks to purchase pieces of Taiwan banks.

The commission says individual Chinese banks will be allowed to take stakes of up to 5 percent in Taiwanese banks. It capped total Chinese ownership, including by institutional investors, at 10 percent.

Investment by Chinese banks can give Taiwanese lenders access to China’s lending market and bolster their earnings.

Cross-strait financial investments like these are one of the most important goals of Beijing/Ma's economic integration program and the big financial houses backing the Ma administration. This may push the market up.

A second move was announced as well...Taiwan shares jumped as the government announced the commitment of funding from the national stabilization fund to shore up the stock market:

"The announcement of the National Stabilization Fund's possible intervention in the local stock market has successfully bolstered market sentiment, as investors hailed the long-awaited show of strong government support," MasterLink Securities analyst Tom Tang said. Vice Premier Sean Chen said Tuesday that in the wake of the death of North Korean leader Kim Jong Il, which could lead to instability in the region, the NT$500 billion (US$16.4 billion) National Stabilization Fund would enter the stock market.

Kim's death provides a convenient excuse for buying votes on a galactic scale by using public money to subsidize wealthy investors while appearing to spark the market for Taiwan's tens of thousands of small players. Let's not forget that a major institutional investor in the market is the KMT itself, through its large Party-owned investment company. But there's no conflict of interest there....not that any of the major international media will ever report that, either...

The stock market has an outsized influence on the way Taiwanese view their own economic performance, which is probably another reason people panic or cheer depending on what its doing. Recall that in 2008 Ma benefited from what appeared to be a coordinated effort by foreign analysts to pump the Taiwan market in the run-up to the election. It promptly began sliding the day he swore in, and hasn't recovered since.

Polaris cut Taiwan's growth prediction next year to below 4%, a move that I suspect heralds further downgrades of Taiwan's economic performance next year. If Tsai wins, she is going to inherit a formidable economic mess exacerbated by whatever damage the KMT can do in the four months between the election and the transfer of power, and by the intransigence of Taiwan's nigh-on useless legislature.
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