Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Three Ways for Investors to Profit fromTaiwan, the Other China

Stock-Markets / Investing 2009 May 05, 2009 - 08:56 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleMartin Hutchinson writes: As you scour the globe for potential post-financial-crisis profit plays, don’t overlook Taiwan. Stock markets around the world have already started to rebound with joy as investors begin to believe that that the unpleasant global recession is finally nearing its bottom. Unfortunately, there’s one sobering conclusion many investors have so far failed to reach: With grossly over-stimulative monetary and fiscal policies at play, most countries will find it very difficult to recover.

Fortunately, a few well-run countries avoided the fallout from the U.S. housing debacle - as well as the fiscal-and-monetary-stimulus mess that followed. And although they have been badly stung by the slump in world trade, these countries are poised to recover with a satisfying bounce.

One such country is Taiwan, and global markets may be just starting to realize this.

A Backgrounder on a Potential Winner

Because its banks were not active in the United States, Taiwan didn’t suffer directly from the collapse in the U.S. housing market. Taiwan also has not suffered from the typical money-tightening consequence of the financial crisis in the world’s emerging markets; it has no need of foreign bank credit, since it consistently runs a payments surplus and has $300 billion in currency reserves.

However, like all the East Asian countries involved in the supply chain to U.S. consumers, Taiwan did suffer a huge decline in exports in the first three months of 2009; its exports dropped more than 35% in the first quarter - less severe than Japan’s drop, but more than those in Korea and China.

I wrote on this some weeks ago, guessing that the export problem was not fundamental, but simply due to United States de-stocking and the difficulties of obtaining trade finance.

The first-quarter U.S. gross domestic product (GDP) figures published April 29 show that this supposition was correct. U.S. inventories dropped a huge $109 billion; the drop in inventories was by itself responsible for 46% of the 6.1% annual rate of decline in U.S. GDP.

Taiwan’s trade figures for March were already improving somewhat, suggesting that this problem might be alleviating. Recent statements by the major Taiwanese semiconductor companies - firms that are intimately involved in the East Asia/U.S. supply chain - confirm that this transformation is, indeed, taking place. Thus, the Taiwanese economy is likely to at least experience a short-term bounce.

Taiwan’s prospects for sustained recovery are better than many Western countries, because its leadership didn’t panic and jump into the fiscal and monetary policies that are almost certain to cause long-term damage in the countries where leaders opted for such strategies.

In fact, the panel of forecasters from The Economist predicted that Taiwan’s fiscal deficit to be only 5% of GDP for the current fiscal year - less than half the deficit projected for the United States and Great Britain, for example. Its short-term interest rates are below 1%, but it currently has no inflation. And the Taiwanese dollar has declined by 10% against the U.S. dollar since September, making Taiwanese exports more competitive.

The Economist panel expects the Taiwanese economy to shrink by 6.5% in 2009, but that is certainly far too conservative, given the signs of export recovery.

Profiting from the “Other” China

Investors have always worried about Taiwan’s relations with The People’s Republic of China, which claims it as part of the mainland country. However, since the election of the Kuomintang president Ma Ying-jeou last year, relations between Taiwan and Mainland China have improved markedly.

Investors who are aware of Taiwan’s potential have long labeled it as “The Other China.”

On Thursday, China Mobile Ltd. (NYSE ADR: CHL) - China’s largest cellular telephone company - announced plans to invest in Taiwan’s Far EasTone Telecommunications Co. Ltd., a first for Chinese investment in Taiwan (Taiwan has huge investments in China), suggesting that trade relations are no longer cool - but are, in fact, warm.

Three possible avenues into Taiwan seem attractive:

  • The Taiwanese exchange-traded fund (ETF).
  • And the two largest producers of semiconductors, an industry central to Taiwan’s growth that should benefit from the recent weakness in the Taiwan dollar. In this context, it is notable that the SEMI book-to-bill ratio for the U.S. semiconductor increased sharply in March to 0.61, with the three-month average of orders up 9%. That’s still not a strong number, but it’s moving in the right direction, and matches recent optimism from Taiwan’s manufacturers.

Let’s look at these three Taiwan profit plays:

The iShares MSCI Taiwan Index ETF (NYSE: EWT) is clearly an efficient way to invest in Taiwan; it has risen recently, but is currently trading at a reasonable 13 times earnings.

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE ADR: TSM) is Taiwan’s largest semiconductor manufacturer. It just reported a tiny first quarter profit on a 54% decrease in sales, but said that its order book was very strong and noted that it expected a sharp rebound in sales and earnings in the second half of 2009.

United Microelectronics Corp. (NYSE ADR: UMC) reported a loss for the first quarter, but just invested $285 million to acquire Chinese semiconductor manufacturer HeJian Technology (Suzhou) Co. Ltd., giving it a substantial foothold in that rapidly growing market. UMC expects a profit in the second quarter and rapid recovery thereafter; it has a strong balance sheet and its free cash flow was positive even in the loss-making first quarter.

[Editor's Note: For more insight on Taiwan's investment allure, please click here to check out a related story by Investment Director Keith Fitz-Gerald on a new accord that paves the way for China to invest in Taiwan. The story appears elsewhere in today's issue of Money Morning.]

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in