Taiwan’s stocks, caught in the backwash of the sparkling rally which hit Hong Kong and Shanghai, are described by financial services firm Jefferies as a “stealth bull market.” “Our optimism on Taiwan was not based on any ‘Taiwan-Shanghai’ connect, but it should be pointed out that in 2012 the Taiwanese central bank signed a Memorandum of Understanding with the mainland allowing for direct settlement of the Renminbi and New Taiwan Dollar,” said a Jefferies report. “Investors have overlooked the favourable competitiveness of the (Taiwan) economy, the tight labour markets, sensible fiscal policy and as well as the booming trade surplus. Interestingly, the low stock market turnover to market cap highlights the low level of speculation,” said Jefferies. This was echoed by an HSBC report. “Investors looking for North Asia exposure should now consider Taiwan, a market that is unique in Asia in that it is the only one trading at a discount to its five-year history. All other markets trade at a premium,” the lender said. Amidst news that the Taiwan Stock Exchange is in talks to link up with the bourses of Shanghai and Hong Kong, the market in Taipei has enjoyed a bull run in recent weeks. The Taiwan Stock Exchange Weighted Index has soared to a 52-week peak at 10,014.28 hit on April 28, having rallied 17.79 per cent from a 52-week low of 8,501.29 on October 16, 2014, a gain of 1,512.99 points in slightly over six months. The market then corrected slightly to 9,820.05 points on April 30. On April 22, Taiwanese media quoted Jiang Yang, vice chairman of the China Securities Regulatory Commission (CSRC), saying CSRC was “actively studying” the possibility of a Shanghai-Taiwan Stock Connect, which can allow investors across the Strait to buy and sell shares listed on the Shanghai and Taiwan bourses. Hong Kong Exchanges and Clearing (HKEx) has had preliminary discussions about a possible link between the bourses of Hong Kong and Taiwan, HKEx chairman Chow Chung Kong said at the HKEx annual general meeting on April 29. The Taiwan Stock Exchange and Tokyo Stock Exchange will probably begin listing exchange-traded funds tracking each other’s major indices later this year, Michael Lin, President of the Taiwan Stock Exchange, told a Japanese publication last January. Taiwanese equities are starting to offer value versus South Korean equities again, said the HSBC report. In the last week of April, Taiwan enjoyed a net foreign fund inflow of US$1.37 billion, while South Korea had a net foreign fund inflow of only US$58 million. So far this year, Taiwan had a net foreign fund inflow of US$7.66 billion, close to India which had US$7.82 billion and more than South Korea with US$6.6 billion, and far above Indonesia, Thailand and Philippines which had a combined net foreign fund inflow of US$1.72 billion, said Goldman Sachs. Although Taiwan’s economic data is not as strong as in the late 1990s, it does appear to be relatively good in the context of its regional peers, said Jefferies. Goldman Sachs forecast Taiwan’s GDP growth to be 3.8 per cent this year, higher than that of Australia, Hong Kong, Singapore, Thailand and South Korea, but lower than China, India, Indonesia.