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Q+A-What Taiwan local elections mean for markets, China
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Q+A-What Taiwan local elections mean for markets, China
Reuters - Saturday, November 27
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Nov 27 - Taiwan voters are choosing mayors in five major cities on Saturday, setting the stage for the 2012 presidential race. A strong performance by the anti-China opposition will stoke concern in Beijing and chill financial markets worried about the future of economic ties.
Here are questions and answers on election result impacts:
WHAT IS AT STAKE IN THE ELECTION ?
The China-friendly ruling Nationalists are running against the anti-China Democratic Progressive Party in five cities -- Kaohsiung, Taichung, the capital Taipei and Tainan -- totalling about 60 percent of the island's electorate.
Only one area is expected to change hands: Taipei, where polls show the DPP narrowly seizing control from the Nationalists.
The Nationalists are expected to remain in power in Taichung and Sinbei, formerly Taipei county, while the DPP should hang on in Kaohsiung, Taiwan's second city on the southwest coast, and in its traditional stronghold Tainan.
(For a related factbox, see [ID:nTOE6A805I]
A gain in seats for either party on Saturday means more money and public exposure that can be leveraged into votes in 2012.
If the DPP keeps the two mayoral posts it controls now and takes Taipei from the Nationalists, it also indicates a broader public discontent with President Ma Ying-jeou, whose ratings have fallen from high levels when he took office in 2008.
HOW WILL FINANCIAL MARKETS REACT TO SATURDAY'S RESULTS?
Taiwan stocks and the Taiwan dollar will slip in the short term if the DPP gains one or two seats in greater Taipei as forecast by local media and analysts.
Short-term investors may shun Taiwan for fear that the opposition DPP's new clout would lead it to the presidency in 2012 and threaten the ruling party's recent moves toward free trade [ID:nECFA] with Beijing after a 60-year chill.
"Some of the support for the Taiwan dollar is due to improved ties, so any sign that those may not continue would be negative," said Patrick Bennett, currency strategist with Standard Bank in Hong Kong.
But longer-term investors will keep their positions in Taiwan and short-term investors will return if it turns out that the DPP chooses not to risk votes by rolling back the ruling party's broadly popular trade deals with China.
A strong showing for the Nationalists on Saturday would see the markets firm slightly on hopes for more tie-ups with China.
WHAT IS CHINA PREPARED TO DO?
Beijing is hoping the Nationalists, its former Chinese civil war enemy that fled to Taiwan in the 1940s, will stay in power. Chinese officials believe the party is more receptive to their goal of political reunification.
China at the same time is engaging the more hawkish DPP through informal talks focused on the economy.
But the DPP has not abandoned support for Taiwan's de jure independence from Beijing, a position virulently opposed by China, which says it would lead to war.
A strong DPP showing on Saturday would prompt China to redouble efforts to back Ma's expected re-election campaign with economic sweeteners.
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