TAIPEI: Improving relations between Taiwan and the mainland in 2010 will be one of a number of factors that will help attract more foreign investment in Taiwan, researchers of a leading global investment bank wrote recently.

In the report published in Barclays Capital's Emerging Markets Quarterly Outlook, researchers of the investment bank forecast that warming cross-Straits ties would trigger more foreign institutional investor interest in Taiwan markets, particularly in its equity and real estate markets.

Three specific factors - including two unrelated to Taiwan-mainland relations - would lead to the influx of foreign capital, the report said.

One is the interest rate disparity between Taiwan and the United States, which is expected to widen because the US is likely to maintain its low interest rate policy for a longer period of time.

Also, a possible revision by Morgan Stanley Capital International (MSCI) to increase the weighting of Taiwanese shares in its equity indexes could give a boost to local shares.

The key factor related to relations with the mainland, the signing of the financial MOUs allowing banking, insurance, and securities firms in Taiwan and on the mainland to invest in each other's markets, will likely attract more mainland funds into Taiwan, the report suggested.

Barclays Capital said net capital inflows into Taiwan's bourse reached $7.2 billion in the third quarter of this year and contended that the trend will likely continue into the first quarter of next year.

The report, titled Sharpen Your Pencil, analyzed the future economic development of emerging markets in Asia, Europe, the Middle East, Africa, and Latin America.

China Daily/CNA

(HK Edition 12/22/2009 page2)