The election win of William Lai will put Taiwan’s currency and stocks in focus this week.
TWDUSD – Weekly Chart
The Taiwan New dollar rallied to 0.03 into the new year. Analysts will now look for the reaction to the weekend’s results.
The TWD rallied after relations between the United States and China improved. However, that sentiment could change again after the election of a new leader unfavourable to China’s goals.
China accused the US of sending “a gravely wrong signal” to individuals pushing for Taiwan’s independence after Saturday’s election result. US Secretary of State Antony Blinken sent the Taiwanese president-elect William Lai a message of congratulations following the result.
Beijing said the message violated Washington’s commitment to maintain only unofficial ties with Taiwan. In a statement, China’s foreign ministry said Mr Blinken’s message broke the US government’s promise to support “only cultural, commercial, and other unofficial relations” with Taiwan.
It added that the Taiwan question is “the first red line that must not be crossed in China-US relations” and said it had lodged a formal diplomatic complaint.
“China firmly opposes the US having any form of official interaction with Taiwan and interfering in Taiwan affairs in any way or under any pretext.”
Beijing recently said Mr Lai was a dangerous separatist in the run-up to the election and ignored his repeated calls for talks. Analysts expect Taiwan’s stock market to suffer this week after a 25% rise over the last year.
“I would imagine the reaction is negative. The market could read weak government in Taiwan, lots of external risks from the mainland and lots of internal risks, because there is no control of the legislature,” said French investment bank Natixis in Hong Kong.
Volatility could continue for a few weeks until investors see how much support Lai will get from parliament, where his DPP won 51 seats to the opposition Kuomintang’s 52 and the Taiwan People’s Party’s eight.