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To: DJBEINO who wrote (7079)	3/9/2000 11:58:00 AM
From: DJBEINO	Respond to of 9582

FUND VIEW-Taiwan stocks seen safe from U.S. risk By Michael Kramer TAIPEI, March 9 (Reuters) - Most of Jardine Fleming's reasons for overweighting Taiwan stocks -- keen demand for the island's electronics exports and a major reweighting in the closely watched MSCI indices -- would come as no surprise to investors. But few would think the Taiwan market, with its reputation for gyrating on political factors, would be a good place to avoid risk. Jardine's fund manager calls it a good place to weather fallout from Wall Street volatility. ``Historically, the Taiwan market has had a low correlation with the United States,' said Sandra Lee, head of brand development and strategic planning at Jardine Fleming Unit Trusts in Hong Kong. Lee said Jardine saw a ``decoupling' between U.S. share markets fluctuating with the volatile fortunes of Internet firms, and Taiwan's TAIEX (^TWII - news) index, which has been powered by a steady boom in demand for consumer electronics. A Jardine investment note to clients in February noted Taiwan had only had a correlation factor of 0.3 with U.S. markets over the past eight years, where a correlation of 1.0 would imply the TAIEX moved in lockstep with the Dow Jones industrial average. Not surprisingly, the top holdings in the US$119.8 million JF Taiwan Fund are the island's made-to-order chip foundries, whose bursting order books have kept their wafer fabrication plants at full capacity for months. Taiwan Semiconductor Manufacturing Co , the world's largest dedicated foundry, accounted for 9.4 percent of the fund's holdings as of February 29, while second-ranked United Microelectronics comprised 9.3 percent. POLITICAL TENSIONS = BUYING OPPORTUNITY Though the TAIEX usually defies the ups and downs of Wall Street, the market nonetheless keeps a nervous eye on mainland China. The index slumped 5.5 percent over 11 sessions since the last round of cross-strait tensions last month. The fall was triggered by a policy ``white paper' issued by China's cabinet on February 21 in which it threatened to resort to ``drastic measures, including military force,' against Taiwan if the island dragged its feet on reunification. Despite domestic jitters, Taiwan Stock Exchange figures show foreign investors were net buyers for all of those 11 sessions, snapping up T$20.685 billion (US$672 million) in Taiwan stocks. ``The China issue is a sensitive issue and we watch it very closely,' said Jardine's Lee. ``It poses some short-term volatility, but we see it as a buying opportunity.' Her colleagues at Merrill Lynch agree. The U.S. investment bank issued a strategy note on Thursday saying ``political uncertainty in Taiwan always creates ideal buying opportunities.' Merrill said local investors were likely to return to the market after the dust settles on Taiwan's hotly-contested March 18 presidential race, and ``foreign investors risk being left to chase prices, which can be a very unrewarding experience.' A central bank official said recently it was reviewing an application by Merrill to boost its alloted investment in Taiwan stocks to US$1.2 billion from US$600 million. MSCI BOOSTS LIQUIDITY Taiwan's central bank, wary of Beijing money in disguise, clamps tight controls on capital inflows. But it has sped up approvals in recent weeks as fund managers boost their Taiwan holdings in line with a reweighting by MSCI. Morgan Stanley Capital International (MSCI) will gradually boost Taiwan's weighting in its MSCI family of indices -- a key ingredient in many fund mangers' weighting formulas -- to 100 percent from 50 percent in 2000 and 2001. Polls of fund managers have found that Taiwan and Malaysia, also slated for an MSCI boost, are among their top Asian picks. A February 15 Merrill Lynch-Gallup survey showed there were 50 percent more buyers than sellers of Taiwan equities in February, up from 39 percent in January. Separately, 41.66 percent of respondents said Taiwan was their favourite market over one year, in a March 1 poll of 12 fund managers, by Reuters and Hong Kong-based Benchmark magazine. ``The liquidity factor is certainly there,' said Jardine's Lee. "JF has built up its position in Taiwan since we anticipated a rise in foreign investment. (US$1=T$30.76) biz.yahoo.com