Johnc

iShares Taiwan ETF: A Bet on Improved China Relations

The market has outperformed the region YTD in a large part because the KMT (Ma's party) was expected to win. Now that Ma has won, the hard work of rebuilding the economy and restructuring the cross straits relationship begins. I am very positive (and hold EWT) but would warn against anyone expecting a "quick pop". The story will unfold over the next two years. And, when that story does unfold, the front runners will have changed. Taiwan is in the early stages of a transition from a manufacturing led economy to one with a much larger services component. I expect Taiwan's economy to look much more like Hong Kong's or Singapore's than South Korea's in two to three year's time. EWT will participate but may lag behind a better constructed portfolio of Taiwan stocks.

Taiwan ETF is China Power Play

Not sure the election is such a slam dunk. Taiwan has serious issues to attend to if it wants to participate fully (think Hong Kong as an example of full participation) in the strong growth we all expect from China in the coming 5 to 10 years.
That said, the market is not discounting a positive turn from the election (in the past, presidential elections were good for 30% to 40% run-ups in the 12-15 months leading into the vote). Therefore any positive developments should lead to a bit of a rerating.
Taiwan is the Asian market most exposed to a US slowdown so a long or deep recession could detract from an otherwise attractive story of economic integration with China.
I have a position in EWT, so net net, I am bullish.

Smart Investors Looking at Taiwanese Stocks

Shaun,
No arguments with your post but I think you should mention that alot of the excitement in the market will build up into the Legislative Yuan (Congressional) and Presidential Elections in Jan and Mar, respectively. Investors should monitor the index level at that time and not feel shy about taking profits if the situation looks a bit frothy (which is very likely). There may be some buy the rumor, sell the news action in the local stock market. If one does get a correction after the elections, then your arguments are still valid and you might get a second chance to play Taiwan in mid 2008.
John