Taiwan Stocks Gain as Ma Plan to Meet China's Xi Lifts Sentiment

  • China, Taiwan leaders to meet for first time in seven decades
  • Global investors bought most Taiwan shares since April

Taiwan’s stocks rose to a three-month high and its currency strengthened as President Ma Ying-jeou’s plan to meet with his Chinese counterpart stoked optimism that improving relations between the two historical foes will boost the island’s economy.

Ma and Chinese President Xi Jinping will talk in Singapore on Saturday, Ma’s office said late Tuesday, marking the first such meeting since a civil war between China’s Communist Party and Taiwan’s ruling Kuomintang ended in 1949. The meeting improves prospects for closer economic ties as polls before January’s election project Ma will be succeeded by opposition candidate Tsai Ing-wen, who is more skeptical of integration with China. The leaders won’t sign any agreements or make joint statements, Ma’s office said.

The Taiex index of shares climbed 1.7 percent to close at the highest level since July as Taiwan Semiconductor Manufacturing Co. and MediaTek Inc. gained the most in eight weeks. Taiwan’s dollar rose 0.1 percent versus its U.S. counterpart to NT$32.595 against the greenback, while one-month non-deliverable forwards advanced 0.4 percent. Global funds pumped a net $723 million into Taiwan shares on Wednesday, the most since April.

"Stocks have mostly been affected by sentiment as the meeting probably won’t have any actual impact or affect the election," said Chu Yen-min, president of KGI Securities Investment Advisory in Taipei. "The meaning is significant. There may be expectations for a further breakthrough now that there’s a meeting."

An eight-month slump in exports and the Taiwan economy’s first contraction since 2009 last quarter have fueled pessimism over the island’s growth prospects. Still, local assets have benefited from receding expectations for a U.S. rate rise this year. Shares have rebounded 8.3 percent since Sept. 30, after the worst quarter in almost four years, while the currency has appreciated 1.6 percent.

Shares of TSMC, the island’s biggest firm, advanced 3.6 percent on Wednesday and second-ranked Hon Hai Precision Industry Co. added 1 percent. MediaTek, which makes chips that power smartphones, jumped 9.6 percent.

Public Opposition

While economic ties with China have strengthened under Ma, there is concern that growing public opposition -- as seen in the 2014 occupation of the legislature to protest a trade deal with the nation -- will be an obstacle to further progress.

The meeting "is important, as some in the market are nervous about Taiwan-China relations if the Kuomintang is not in office in the next term," said Wai Ho Leong, an economist at Barclays Plc in Singapore. "Some of the gains will be knee-jerk reactions, but there are a lot of Taiwanese businesses on the mainland. Travel and tourism, as well as airlines, hotels, retail and insurance, can all benefit."

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