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Taipei Risk to Markets

The last couple of weeks has been positive for the majority of financial markets. There have been large inflows that were due to many reasons and it has led to estimates of a bottom to the bear market.

But within this period a new geopolitical risk has started to arise and it is a risk of conflict between China and the USA. This is related to the visit by the US House Speaker to Taiwan during her Asia trip that begins this week. Though there is no official schedule, according to certain online media it is going to take place on the 4th of August.

If the visit occurs then the conflict that has been escalating slowly will accelerate to a new level. What action will be taken by China is not determined but it will be more important to see how the USA reacts to it.

From a financial market perspective, this conflict would be impacted more than Russia- Ukraine conflict. But whether it impacts supply more than demand, would be more important to analyse.

Taiwan is a leading exporter of semiconductors and other high-tech components. Any conflict directly in the country would impact the supplies to large extent.

But on the other end, China's involvement in the conflict would impact already slowing demand resulting in lower imports by China.

Though all of this is hypothetical as of today so was the Russia-Ukraine conflict when we mentioned it and the risk relating to it in December 2021 and January 2022 articles.


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