Continued 'Bull' on TAIEX

“Taiwan is a buy story as the economic and commercial assumptions from cross-strait ties are positive for the market,” he said in a phone interview today. “Asian markets will rely on company earnings beating expectations in 2010 as good year-on-year economic data in the first half of 2010 is mainly discounted.”

This above quote from this bullish article on the TAIEX. The author claims that increased cross-strait agreements and potential upcoming ECFA and MOUs and whatever other agreements they come up with, will strengthen the position of Taiwan equities.

Consider these few points, and take from this what you will.

The article mentions Ma Ying-jeou took office in May 2008 (specifically the 20th of May), and whos' platform consisted of "easing curbs on investments and increasing transportation links with China." May 20, 2008 marks the high over the past 2 years on the TAIEX. Despite all the "fanfare" over increased links and cross-strait agreements, the TAIEX has never seen those prices since.

What does this say? Well, it goes along with the saying, "Buy on rumor, sell on the news." Buy on rumor that Ma is likely to win, sell when he actually does. If you did? You made out like a bandit.

Furthermore, it sort of shows that fundamentals and the news that supposedly drives stocks, doesn't really drive price. If so, why did TAIEX trade down after news of the oncoming "Chinese stimulus" into the Taiwan economy? If so, why are global markets trading up since March, despite worsening economic numbers (U.S. "official" unemployed now over 10%!).

I will continue to watch the TAIEX carefully, as it may well turn out to be another "buy the rumor, sell the news" opportunity. Of course, higher prices are definitely possible, but my point here is to not trust these so-called "experts" and "analysts" at face value. How many can you recall, actually came out and downgraded stocks and called for the crash of 2008?

"God works in weird ways, markets work in twisted ways, to accomplish the most obvious in the most unobvious ways."