The Coming Week in Asia: Taiwan Girds for Election

Beijing has been saber rattling ahead of Saturday's election. Also, India's highflying market.
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TOKYO -- China made headlines this week when it warned Taiwanese voters not to elect a president on Saturday who would push for the island's independence.

"Do not act on impulse at this juncture which will decide the future course that China and Taiwan will follow. Otherwise, I'm afraid you won't get another opportunity to regret," Chinese Prime Minister

Zhu Rongji

said during his annual news conference Wednesday. If Beijing had its druthers, Taiwan voters would elect

James Soong

, a former provincial governor who is the most sympathetic of the three candidates toward reunification.

The other two candidates are

Lien Chien

, the current vice president and heir-apparent to President

Lee Teng-Hui

, and

Chen Shui-Bian

, Taipei's independence-minded former mayor. At present, the race is too close to call. A victory for Chen would doubtless raise the mainland's hackles.

Taiwan dustups always make investors in Asia wary. Beijing insists that its "renegade province" will someday return to the fold, and one worries that its bluster may one day turn into something more severe. In 1996, the year of Taiwan's first democratic election, China saw fit to "test" missiles off the island's coast. Military action remains unlikely, however.

"Regardless of the outcome, you're likely to see China respond with words, not missiles," said Tom Gallagher, senior managing director of

International Strategy & Investment Group

. "The biggest problem is if Chen wins. If either of the other candidates wins, there's probably a market rally."

Nervousness over the election has sent the

Taiwan Weighted Index

down 13% in the past month.

No sooner will the dust have settled in Taiwan than Asia observers will shift their attention on another region that's been mired in a similar conflict. Scheduled for a six-day whirlwind tour that will surely make many

Central Intelligence Agency

officials nervous, U.S.

President Bill Clinton

will be in India, Pakistan and Bangladesh starting Sunday evening.

Clinton, whose visit will mark the first U.S. state trip to India since 1978, is expected to address security issues between India and longtime nemesis Pakistan. The two aren't shy when it comes to talking about their respective nuclear capabilities and intents for Kashmir, the disputed territory bordering the two countries. But Clinton surely also will highlight India's booming information technology industry. And this won't just be for India's sake. More than half the revenues for most Indian software companies come from the U.S. -- a fact that hasn't been lost on overseas investors. They pumped a record $707.2 million into Indian stocks in February alone.

"There is an estimated shortage of 1 million IT professionals worldwide, and Indian companies are well-placed to take advantage of this situation," says Anantha Narayan, analyst at

Morgan Stanley Dean Witter


The heads of leading software and computer makers have been key in prodding the government to deregulate and reform old companies. And these efforts are definitely paying off for stock investors. The benchmark

Bombay Sensitive Index

has jumped 37.2% over the past year, three times more than the

S&P 500


Indian shares listed in the U.S. are all the rave right now, and scarcity might have something to do with that. Because Indian firms were not allowed to list overseas until three years ago, there are only three Indian stocks traded on the



New York Stock Exchange


Infosys Technologies

(INFY) - Get Report


Satyam Infoway

(SIFY) - Get Report




. Infosys is up more than 1100% over the past year. Since they listed in the U.S. last fall, Satyam's ADRs are up 712% and ICICI's 177%.

Another 50 or so firms are privately placed in the Rule 144A market and so do not come under the scrutiny of the

Securities and Exchange Commission

. Some shares listed in the 144A also are called Global Depository Shares.

Only investors that own or manage at least $100 million in securities can buy or sell shares listed under Rule 144A. And unfortunately, there are no open-end India-focused mutual funds. The best investors can do is buy an emerging-market fund with a heavy India weighting such as the


Pioneer Emerging Markets Fund A, which has around 14% of total holdings in Indian shares. It's up 110% over the last year.

Fortunately for retail investors, about 10 more Indian firms are expected to list on U.S. soil over the course of the year, including IT and consumer products firm


, pharmaceutical company

Dr. Reddy's Laboratories

and software servicer

Polaris Software Lab