Taiwan risk assets to rally over election results

Mainland commentators expressed cautious satisfaction with Taiwan’s national election outcome – which returned the Democratic Progressive’s Party (DPP) to office but with a sharply reduced mandate and the loss of its majority in the national legislature.

Taiwan’s voters gave the presidency to the pro-independence DPP, but with a legislative veto in the hands of the pro-unification Kuomintang.

That’s the best possible outcome for Taiwan, whose citizens do not want to be absorbed into the Communist mainland – but don’t want a confrontation over prospective independence, either. For Beijing, stopping Taiwan from moving toward independence is non-negotiable.

The weakened DPP, which has feinted in the direction of independence in the past, is in no position to advance a sovereignty agenda.

The election is a victory for the status quo. Since anything other than the status quo would be worse than the status quo, it’s the best possible outcome. The price of option hedges on the Taiwan dollar/US dollar cross rate (expressed as points of implied volatility) should plummet when markets open in a few hours.

Bloomberg News commented: “The ruling Democratic Progressive Party’s victory in Taiwan’s presidential election Saturday removes key uncertainties for local markets, analysts said, noting China’s muted response and the prospect of major parties having to cooperate on policy.”

Here is the commentary published by the popular Chinese blogger “Uncle Rabbit” in the “Observer,” a prominent news and opinion site based in Shanghai:

“Uncle Rabbit” added that the Kuomintang emerged as the largest party in the legislature, which means “that the people are positively disposed toward the Kuomintang’s position and policies, giving it the power