Next to devalue? The country to watch is Taiwan.....
I'll preface my contribution with some basics, but you'll see what I'm getting at.
Taiwan wants independence from China. During Clinton's recent visit, China had him publicly back their "No Independence" position. This, plus all the hooplah over the military exercises, obviously humiliated Taiwan.
Nextly, Taiwan's most recent export data showed a severe drop from last year's figures.
Taiwan stocks have held up rather well amid all the Asian turmoil, with the main index posting a handsome gain last year. Though their market has performed poorly this year, it still has yet to have a tumble of the magnitude suffered by neighbors like HK.
Also, the Taiwan Dollar, as you all know, has depreciated very little compared to other regional currencies.
The fact is, as impressive as the Taiwanese leaders have been with economic policy, we all knew it was only a matter of time before unfavorable data would begin to smear this export powerhouse.
Well, now what do we have here?
Taiwan needs to adjust monetary policy, as it is finally beginning to show significantly negative economic effects related to it's neighbors' misery. They also would like to get back at China & the U.S. anyway the can, showing that they are not to be pushed around.
China, as we all know, is under pressure to devalue, but is holding out, proud as ever.
Which leads me to an interesting conclusion:
The next country to devalue will be Taiwan. What will it achieve?
1. It will stimulate its own exports once again.
2. It will put further pressure on China's exports.
3. It will force China to devalue.
4. It will give a black eye to the U.S. and China simultaneously.
I can't possibly think that the Taiwanese have not already thought about this. The question is when will they do it. My estimation is that the next unfavorable piece of economic data out of Taiwan will be their excuse.
Of course, I suggest we all position ourselves to profit handsomely.
One can further speculate that this could lead to another round of competing devaluations, as Brazil and other export big wigs mull things over. Taiwan is such an exporting bulldog that such an action, should it occur, can not be ignored or tolerated.
In my opinion, the next six months are going to be quite an exciting time for all of us armchair Soros' and Robertson's. The Asia miniseries seems to be reaching a climax. |
