Taiwan stocks will likely rise next week after President Ma Ying-jeou won a second term, indicating further good economic ties with China, but gains are unlikely to be sustained as concerns over the global economic situation dominate investor thinking.
Taiwan voters re-elected Ma, endorsing his push for closer ties with Beijing and removing a potential irritant in Sino-US relations, over an opposition party looking to slow down China ties. Ma also won a parliamentary majority in a concurrent vote, removing one risk factor from the Taiwan stock market.
But others remain, such as the situation in Europe after S&P cut the credit ratings of several eurozone members and Greek debt restructuring talks broke down, tensions over Iran, a possible slowdown in China's economy and doubts over the sustainability of a US recovery.
"There will be a celebration rally, on Monday and probably Tuesday too," said Simon Liu, deputy investment officer of Polaris Financial Group's fund unit. "We don't think the main index would rise above 7,500 points though."
The benchmark TAIEX index ended Friday at 7,181.54 points. For 2011, it slumped 21 percent in its biggest yearly fall since 2008 and was one of Asia's worst performers, reflecting anxiety over the health of the export-led economy.
China is widely expected to continue dialogue after Ma's re-election, with ties likely to get a boost in the banking , tourism and airlines sectors, whose stocks are likely to be among the gainers.
"More opportunities and faster progress across the Taiwan Strait will take place over the next four years than the last four years," said Liu.
In Ma's first four years, direct flights between China and Taiwan increased to about 100 a day from none, while some 2.6 million Chinese tourists visited the island, spending over $3 billion. Taiwanese investment in China reached $39 billion and bilateral trade was worth $145 billion a year by 2010. A trade deal in 2010 cut tariffs on hundreds of Taiwanese goods in the mainland.
But with the vote out of the way, investors will be focusing on other issues.
"They'll be watching if the US economy continues to show strength ... and at this point, it seems this is as bad as it gets for Europe's debt crisis," said J.J. Lee, chief investment officer of Fubon Securities Investment Trust.
Corporate earnings will also be a focus when Taiwanese companies report first-quarter results next month, he said.