Market reaction is wrong, says investor David Roche

Taiwan’s election results place the island on a “collision course with China” and the market reaction has been too sanguine, according to veteran investor David Roche.

Beijing has already dismissed the outcome of Saturday’s elections, which saw the ruling Democratic Progressive Party’s Lai Ching-te elected president alongside a split parliamentary vote.

China sees the DPP as a threat to its ultimate aim of “reunification” with the self-governing island of 23 million people, and claimed on Saturday that the outcome of the presidential election was not representative of popular opinion. The DPP rejects the so-called “One China principle” and advocates a separate and distinct Taiwanese national identity.

“If you look at what this election does, it tells you quite clearly there is absolutely no support in Taiwan for reunification with China, and that will not be possible,” Roche, president and global strategist at Independent Strategy, told CNBC’s “Squawk Box Europe” on Monday.

“What this election tells you in all of its ramifications, including the split of the vote in the Legislative Yuan, is that Taiwan is now a mature, sovereign, democratic state, and that is not something that China will accept. For China, that is separate to them, so that’s why you’re running towards a bigger crisis,” he said.

China over the weekend insisted that Taiwan is “China’s Taiwan” and lashed out at world leaders who congratulated Lai, accusing them of meddling in China’s internal affairs.

The market reaction was muted across Asian stocks on Monday, however. The Taiwan Weighted index rose 0.19% while mainland China’s CSI 300 index closed 0.1% lower.

The reason markets have responded in this muted manner, Roche…