Nancy Pelosi’s Taiwan Gamble Increases Risk in Asia

 

Taiwan Air Force jet fighters taxi on a runway Friday at an air base in Hsinchu, Taiwan. PHOTO: JOHNSON LAI/ASSOCIATED PRESS

Nancy Pelosi, the speaker of the U.S. House, has come and gone in Taiwan. In her wake have come missile flyovers, enough discussion to briefly crash China’s Twitter-like microblogging service Weibo, the largest Chinese military exercises near the Taiwan Strait in decades—and for those on the island, a surreal sense of life mostly going on.

Markets reacted strongly but not catastrophically. U.S. 10-year Treasury yields fell to a four-month low ahead of Mrs. Pelosi’s arrival as investors fled for safety—and then jumped back after her plane landed without incident. Taiwan’s main stock index, after a precipitous drop Tuesday, has since clawed back all that ground. Shares of Semiconductor Manufacturing International Corp., 981 7.06% China’s chip manufacturing national champion, which also dropped ahead of the visit, have gained 15% since her plane landed and China announced its military drills. The S&P Defense and Aerospace Select Index is up 9% since July 18, when news of Mrs. Pelosi’s planned trip first broke, outpacing the S&P 500’s 8% gain.

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Source: wsj, Nathaniel Taplin

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