The Election No One's Watching
By Ian Davis
At a time when the U.S. presidential race is generating worldwide interest, investors would be wise to pay some attention to a much less well-known election taking place on the other side of the world...
Last week, Taiwan held its parliamentary elections, which resulted in a resounding win for the Nationalist Party. The Nationalists took 81 of the legislature's 113 seats.
The opposition Nationalist Party, unlike the ruling Democratic Progressive Party, is interested in cultivating closer ties with China... and apparently the Taiwanese people approve.
This election was a precursor to a March 22 presidential election, which many believe will have the same outcome.
The Nationalist presidential candidate – Ma-Ying-jeou – says he will loosen restrictions on investing in China and open direct air and sea links if his party takes control of the presidency. He also favors allowing Chinese investment in Taiwan.
The following chart shows the percent of Taiwanese exports destined for the U.S. compared to the amount headed to China. As you can see, China now imports more than twice what the U.S. does from Taiwan.
Taiwain's New Export Market 
This could be good news for the Taiwanese, since it seems the U.S. is in the early stages of a recession... The S&P 500 is down 10.5% since October 9, and sectors like finance and housing have suffered more.
Conversely, emerging markets – and China in particular – have performed amazingly well over the last couple of years. I believe Taiwan will be the next to experience this incredible growth rate.
The Taiwan fund (TWN) jumped 4% in one day on the election news... This is just the start. If Taiwan opens its financial markets to Chinese investors, it could mean double-digit gains in a matter of months.
Just look at the Hong Kong stock market. When it opened to Chinese investors back in August, it rallied by 49% in three months.
Good investing,
Ian Davis