This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Will Taiwan Open to Chinese Investment, or Will Protests Derail the Deal?

TAIPEI (TheStreet) -- A blockade of Taiwan's parliament and clashes between protesters and police Monday threaten passage of a trade pact that would open the investment-hungry island to investments from the economic powerhouse of China.

Banks, tour operators and health care firms from the world's 26th largest economy must wait indefinitely -- likely until at least August -- for ratification of a China-Taiwan deal that would liberalize the service sector.

The deal was signed in June with ratification expected by the end of 2013, but postponed because of disputes in parliament. The fresh delay this month has already disappointed markets, with Taiwan's financial and insurance sub-index down 2% since Wednesday.

"In the short term, share prices are going to be affected," says Shih Hsiao-chi, economist at SinoPac Securities in Taipei. "If this situation at the legislature keeps going on goes on, share prices will be more heavily affected and foreign investors will start to waver."

The trade pact would open 80 service categories in China and 64 in Taiwan, allowing Taiwanese firms to expand into their biggest market, where two-way trade surpassed $100 billion for the first time in 2010.

Thousands of protesters, mostly students backed by Taiwan's main opposition party, say their government rushed into the deal with an old political rival without transparency or due process. The government wants a speedy approval to catch up with neighbors that already have trade deals with China.

Hundreds clashed with police as they tried to occupy cabinet offices in Taipei early Monday. Several hundred more have occupied the legislature since Wednesday and remained on Monday, scuttling plans to ratify the trade pact this month or next.

A delay of service trade agreement means some of Taiwan's biggest banks with toeholds in China, names such as Cathay Financial (CHYYY:OTC) and Mega International Commercial Bank (2806:Taiwan), must wait indefinitely for a chance to expand. 

Many analysts in Taipei consider shares on the Taiwan Stock Exchange to be undervalued.

Some Taiwanese companies do trade in ADRs, and ETFs such as iShares MSCI Taiwan Index (EWT) give U.S.-based investors another route to local equities.

China signed the service trade pact partly as a political favor as it sees self-ruled Taiwan as part of its territory and has threatened to take it by force if needed. But it prefers unification through peaceful means such as economic ties.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
EWT $15.64 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs