Big trouble in little China?

“Islamic State recognizes Taiwan in new propaganda video.” CNBC Headline, 25 November 2015 Followers of our views will be aware that East Asian geopolitics is one of the emerging markets risks that we worry about most. The complicated list of actors includes China, North Korea, South Korea, Taiwan, Japan and the United States. Despite the above quote, we do not expect Islamic State to become a significant player in East Asia. Rather, we highlight the quote as it shows just how delicate the relationship between China and Taiwan is. As the largest and third largest markets in the MSCI Emerging Markets Index respectively (with a combined 38.3% weight as at 1 December), this relationship matters to emerging markets investors. Given that, the meeting in November between Chinese president Xi Jinping and the Taiwanese 'leader' (as Western media prefer) Ma Ying-jeou was an intriguing one. (VIEW LINK)