In an about-turn for Asian risk analysis, elections in Taiwan and Malaysia have shown a shift in short-term political risk from Southeast Asia to North Asia, long seen as the safer investment target.
This has implications for investment flows into the region as governments from Jakarta to New Delhi brace for elections in the months ahead, analysts say.
"In Malaysia, we had the most investor-friendly outcome imaginable versus the least investor-friendly outcome imaginable (in Taiwan)," said Tim Condon, head of Asian financial market research at ING Financial Markets.
Malaysian Prime Minister Abdullah Ahmad Badawi's multi-ethnic coalition extended its two-thirds control of the national parliament and wrested control of a key northern state from opposition hard-line Islamists.
In Taiwan, after a bitter campaign and a failed assassination attempt, incumbent Chen Shui-bian won re-election as president on Saturday by the thinnest margin. Rival Lien Chan immediately contested the result and demanded the ballots be recounted.
Strategists said Chen's election and its aftermath increase political risks in Greater China and also North Asia, given that South Korea is still reeling after the unprecedented impeachment of President Roh Moo-hyun.
Taiwan stocks tumbled 6.7 percent on their first day of trade after the election, and analysts said near-term risk in the region remains as the island is wracked by political turmoil.
Some $28 billion in investor wealth was wiped out.
"Short-term political risk in Greater China has gone up," ING's Condon said. "The risk that it remains permanently higher goes up if China and Taiwan see different messages in Taiwan's elections."
China's furious economic growth has attracted a flood of foreign direct investment, while portfolio investors have snapped up Hong Kong-listed Chinese shares over the past year.
Taiwan, meanwhile, has been the second-most-preferred destination for foreign portfolio investors in Asia over the past year thanks to a re-rating of technology stocks. Taiwan has attracted $5.2 billion in foreign equity investment thus far this year, compared with $15.9 billion for all of 2003.
"Our call here is that this is the worst imaginable scenario after the election," said Daniel Poon, head of Hong Kong and China equities at ABN Amro. "Today and tomorrow might be crucial.
Events in Tawain have dampened sentiment in Hong Kong, where residents have been promised full democracy by 2008 but are sceptical about whether China will stick to the agreement. Hong Kong stocks fell more than two percent on Monday afternoon.
"There will be a slight increase in the (Greater China) risk premium from the investor's angle," said Henry Ho, head of Hong Kong and China Research at Merrill Lynch. "Expectations for further economic ties and also the reunification of Taiwan with China will take longer than expected."
Still, market watchers said the mainland China story - powered by an economy that grew at 9.1 percent last year - would remain compelling for investors.
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