2012-01-13

Taiwan election this weekend

The prediction markets in Taiwan are shut down because the government considers them a form of polling, which is not allowed two weeks ahead of the election. However, given that DPP candidate Tsai Ing-wen was the predicted winner when the market stopped trading, there are contracts predicting when she will visit the Mainland of China. Currently, those contracts are trading at around 90% for a visit in Q2.

In the financial and media markets, falling bond yields are being interpreted as a sign that Ma Ying-jeou is headed for victory. Low Bond Yield Shows Faith in Taiwan-China Ties
Taiwan’s 10-year bond yields at 1.28 percent are lower than any of the 47 major sovereign issuers except Switzerland’s 0.80 percent and Japan’s 0.95 percent. The Taiwan dollar strengthened 1.3 percent in the past three months against the greenback as investors favored economies with the strongest finances during the European crisis. The island’s debt is 33 percent of gross domestic product, half the ratio of the U.S., and its $386 billion foreign reserves are the fifth largest.
Financial assets have rallied in the island before the Jan. 14 contest between President Ma Ying-jeou of the Kuomintang Party, who has championed closer ties with China, and Tsai Ing- wen, chairwoman of the opposition Democratic Progressive Party. While Tsai said in a November interview that the island should avoid becoming too dependent on China’s economy, she said her party is now more focused on domestic issues than sovereignty questions.
Socionomics and the prediction markets argue for a change in leadership, the financial markets and the last media polls had a slight edge for Ma. In two days, we'll find out.

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