KMT-CCP Meeting Pushes Taiwan Markets Up

UNCLAS TAIPEI 001344 SIPDIS SIPDIS STATE PLEASE PASS AIT/W AND USTR STATE FOR EAP/RSP/TC, EAP/EP USTR FOR ALTBACH USDOC FOR 4420/USFCS/OCEA/EAP/LDROKER USDOC FOR 3132/USFCS/OIO/EAP/ADAVENPORT TREASURY FOR OASIA/LMOGHTADER TREASURY PLEASE PASS TO OCC/AMCMAHON TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN E.O. 12958: N/A TAGS: EINV EFIN ECON PINR TW SUBJECT: KMT-CCP Meeting Pushes Taiwan Markets Up ¶1. During the week of April 10 - 14, Taiwan's stock market rose in anticipation of favorable results from the April 14-15 KMT-CCP economic forum. Taiwan portfolio investors started heavy trading in stocks before opening of the forum on April 15. Taiwan's stock price index rose 2.5% from 6,782 points on April 10 to 6,952 points on April 14. On April 17, Taiwan's stock price index further rose another 0.7% to a 64-month high of 7,000 points. From April 10 to 17, stock prices for tourism and construction issues shot up an average of 17% and 15%, respectively. Transport issues also reported a rise of 8%. ¶2. Foreign portfolio investors responded positively to the forum. They bought NT$34 billion (US$1.05 billion at the exchange rate of NT$32.5 per USD) more in stocks than they sold in the week of April 10-14, sending their cumulative net stock purchases to NT$106.9 billion (US$3.3 billion) so far in April. Local institutional investors made net stock purchases of NT$10 billion. In an interview with local reporters, Kingpo (electronic) Group Chairman Hsu Sheng-hsiung said that the PRC's opening measures will help Taiwan farms and tourism industry and drive Taiwan's stock prices up throughout this year. Tourism Industry -------------- ¶3. A liberalized policy to allow PRC nationals to tour Taiwan will directly benefit Taiwan's tourism industry, despite the many remaining restrictions on such tourist trips. Taiwan's Tourism Bureau (TB) estimates that annual spending by PRC tourists in Taiwan may reach NT$19.5 billion (or US$600 million) based on the 1,000 arrivals per day limit set by the PRC, and an average stay of seven days. The Taiwan Tourism Association (TTA) is more optimistic than the official estimate, predicting increased revenue of NT$30 billion. PRC tourism would boost spending at hotels, department stores, recreational resorts & facilities, and transport companies. Complaints -------------- ¶4. The stock market rise indicates that a number of people are willing to place a bet on increased tourism across the Strait. However, Taiwan tourist agents have complained that the PRC may reject Taiwan tourist agents that have not been "cooperative" with the PRC in the past. YOUNG