Jim Rogers invests in Taiwan on improving China relations

Rogers, 65, said he recently bought exchange-traded funds tied to Taiwan, predicting the two economies will “merge” and that the island’s currency will be boosted by appreciation in the Chinese yuan. The opposition Kuomintang’s Ma Ying-jeou and the ruling Democratic Progressive Party’s Frank Hsieh both favor closer links with China, which is officially at war with Taiwan.

“Both of them are going to bring peace,” Rogers, chairman of Rogers Holdings, said in an interview with Bloomberg Television Wednesday in Singapore. “It’s ultimately going to be a merger of Taiwan and China. The currencies are going to merge. The economies are going to merge.”

Taiwan’s dollar has risen 5.5 percent this year, while the benchmark TAIEX stock index gained 5.6 percent in the past month as Ma and Hsieh promised to expand travel and investment ties should they win the March 22 vote. Taiwan has restricted direct shipping, air and postal links with the mainland since the Kuomintang retreated to the island in 1949 after losing a civil war in China to the Communist Party.

“Jim Rogers is commander of this wave of bullish sentiment,” said Ernest Chiang, who manages the equivalent of US$65 million for IBT Asset Management Co. in Taipei. “People optimistic about the election results have only today and tomorrow left.”

The Kuomintang’s Ma was ahead of ruling party presidential candidate Frank Hsieh in surveys before a ban on publication of poll results started on March 12. “Under my presidency, there will be peace and prosperity across the Taiwan Strait instead of confrontation and tension,” Ma said in an interview March 14 with Bloomberg Television.

“We would expect Ma to win,” said Peter Eerdmans, head of emerging market bonds for Investec Asset Management Ltd. in Cape Town, South Africa, who helps manage US$55 billion of bonds. “A KMT win is more business friendly and more China-friendly and that will boost the local market.”

“For investors there’s an opportunity if Taiwan becomes more China-friendly,” Eerdmans said. “Taiwan companies may be allowed to hold more in Chinese companies and you will get a lot more tourists and buyers of real estate. It’s very positive.”

China has offered to discuss peace with any Taiwanese party that rejects independence, while maintaining a threat to invade if a formal split is attempted. Chinese Premier Wen Jiabao said this week he’s “hopeful” talks with Taiwan can resume, and will pursue direct trade, postal, and air and shipping links.

The TAIEX advanced 1.9 percent to 8337.62 by the 1:30 p.m. close in Taipei Thursday. Cathay Financial Holdings Co., the island’s biggest financial group by market value, surged 7 percent. The Taiwan dollar gained 0.1 percent to NT$30.692. Taiwan’s local currency bonds have returned 1.6 percent this year, according to an HSBC Holdings Plc index.

Taiwan’s currency has been the worst performer in Asia outside of Japan in the past three years as economic growth slowed to an average 4.09 percent annually since Chen Shui-bian was elected in 2000, from 6.48 percent over the previous eight years. Chen of the pro-independence Democratic Progressive Party favored keeping Taiwan’s distance from China with restrictions on investments and travel.

“As soon as the market opens, I will be buying some more Taiwan,” Rogers said in the interview late Wednesday. “We’ll see if it’s an overlooked trade or not. I haven’t heard many people talking about Taiwan in 15 to 18 years.”

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