Presidential election

On January 13, 2024, Taiwan will hold the 16th President, Vice President and Legislative Elections. This is Taiwan’s 8th direct citizen election of the President and Vice President. It is also an important event affecting Taiwan’s politics, society, economy and international relations. This article will analyze the possible impact of the 2024 presidential election on financial markets, including the stock market, foreign exchange market, bond market and financial industry.

Stock Market

The stock market is an important indicator reflecting economic prosperity and corporate profits, and is also the focus of investors' attention. The presidential election will affect the trend of the stock market due to the following factors:

Policy direction: Different candidates will have different policy directions and opinions, such as taxation, finance, industry, energy, social welfare, etc. These policies will affect the cost, income and competitiveness of enterprises, and in turn affect the stock price. Generally speaking, investors will prefer policies that are prudent, open, and friendly to business, and will oppose policies that are radical, closed, and hostile to business.

Political risk: Political risk refers to the risk of loss or fluctuation in investment income or asset value due to political events or changes. In Taiwan, political risks mainly come from cross-strait relations and the international situation. Cross-Strait relations affect Taiwan's security, trade, and diplomacy, while the international situation involves Taiwan's status and role in the global supply chain and market. If the results of the presidential election are not conducive to cross-strait peace and stability or international cooperation, the stock market may be under pressure or fluctuated.

Changes in election conditions: Changes in election conditions refer to changes in the support or competitiveness between candidates, which are usually affected by factors such as opinion polls, political opinions, debates, and events. Changes in the election situation will affect investors' expectations of future policy directions and political risks, thereby affecting the confidence and sentiment of the stock market. Generally speaking, investors will prefer changes in the electoral situation that are stable or in favor of their preferred candidates, and are opposed to changes in the electoral situation that are turbulent or in favor of candidates they do not like.

According to historical data, Taiwan's stock market usually experiences a certain degree of fluctuation before and after the presidential election, but there is not necessarily an obvious pattern or trend. For example, before and after the 2000 presidential election, Taiwan's stock market fell sharply, mainly due to the impact of the Asian financial crisis and the bursting of the technology bubble; before and after the 2004 presidential election, Taiwan's stock market showed a trend of rising first and then falling. Mainly because it was the time when the United States invaded Iraq and the impact of the March 19th shooting; before and after the 2008 presidential election, the Taiwan stock market first fell and then rose, mainly because it was the time when the U.S. subprime mortgage crisis and cross-strait relations The impact of improvement; before and after the 2012 presidential election, Taiwan's stock market experienced a slight rise, mainly due to the impact of global economic recovery and stabilization of cross-strait relations; before and after the 2016 presidential election, Taiwan's stock market experienced a slight decline, mainly due to Because it was the time when China's economy was slowing down and cross-strait relations were deteriorating; before and after the 2020 presidential election, Taiwan's stock market rose sharply, mainly due to the outbreak of the new coronavirus pneumonia epidemic and the strong demand for chips.

Forex Market

The foreign exchange market is an important indicator that reflects currency supply and demand and exchange rate changes, and is also the focus of investors' attention. The presidential election will affect the trend of the currency market due to the following factors:

Monetary policy: Different candidates will have different monetary policy directions and propositions, such as interest rates, exchange rates, foreign exchange reserves, etc. These monetary policies will affect factors such as currency supply and demand, capital flows, and inflationary pressure, which will in turn affect the exchange rate. Generally speaking, investors prefer looseness, stability, and flexibility.

Bond Market

The bond market is an important indicator reflecting changes in bond supply and demand and interest rates, and is also the focus of investors' attention. The presidential election will affect the trend of the bond market due to the following factors:

Fiscal Policy: Different candidates will have different fiscal policy directions and opinions, such as budget, deficit, debt, public investment, etc. These fiscal policies will affect factors such as the government's balance of payments, debt levels, and credit ratings, which will in turn affect the supply and demand of bonds and credit risks. Generally speaking, investors will prefer fiscal policies that are frugal, responsible, and transparent, and oppose fiscal policies that are profligate, unstable, and concealed.

Economic growth: Economic growth is an important indicator reflecting economic activity and productivity, and is also the focus of investors. The presidential election will affect the trend of economic growth due to the following factors:

Industrial structure: Different candidates will have different industrial structure directions and propositions, such as industrial upgrading, transformation, diversification, etc. These industrial structure directions will affect the competitiveness, innovation, growth potential and other factors of the industry, thereby affecting economic growth. Generally speaking, investors will prefer an industrial structure with high added value, high technology, and high growth, and oppose an industrial structure with low added value, low technology, and low growth.

Trade relations: Trade relations are an important indicator reflecting the international market and resource allocation, and are also the focus of investors. The presidential election will affect the trend of trade relations due to the following factors:

Cross-Strait Relations: Cross-Strait relations are an important indicator reflecting the political, economic and social interaction between Taiwan and Mainland China, and are also the focus of investors' attention. Cross-Strait relations will affect various cooperation and competitions such as trade, investment, and tourism between Taiwan and Mainland China, which will in turn affect Taiwan's economic growth. Generally speaking, investors will prefer cross-Strait relations that are peaceful, stable, mutually beneficial, open and inclusive, and oppose cross-Strait relations that are confrontational, dangerous, zero-sum, closed and exclusive.

International relations: International relations are an important indicator reflecting the political, economic and social interactions between Taiwan and other countries or regions, and are also the focus of investors. International relations will affect various cooperation and competitions such as trade, investment, and tourism between Taiwan and other countries or regions, which will in turn affect Taiwan's economic growth. Generally speaking, investors will prefer international relations characterized by friendly cooperation, multilateral participation, and free trade, and oppose international relations characterized by hostility, isolation, and protectionism.

Market expectations: Market expectations are an important indicator that reflects investors' confidence and sentiment about future economic and financial changes, and are also the focus of investors' attention. The presidential election will affect market expectations due to the following factors:

Changes in election conditions: Changes in election conditions refer to changes in the support or competitiveness between candidates, which are usually affected by factors such as opinion polls, political opinions, debates, and events. Changes in the election situation will affect investors' expectations for future policy directions and political risks, thereby affecting market expectations.