Editor’s Note: Earlier this week 12% Letter editor Tom Dyson put out a Jim Rogers teaser, “The World’s Cheapest Stock Market Is Ready to Soar.” Turns out Jim is investing in Taiwan. Taiwan is cheap. And there’s a catalyst: a new Taiwanese president means trade between Taiwan and China is booming.

Tom is a major Jim Rogers fan. He says Jim is “never wrong.”

Just look at the two trades he’s recommended so far this decade. In 1999, he started telling people to buy commodities. He set up an index to track commodities – the Rogers International Commodities Index – and published a book about commodities in 2004. The Rogers International Commodities Index is up 470% since inception.

China was his second trade of the decade. He’s been talking up China since the early part of this decade, too. The Chinese stock market went up 400% between 2006 and 2007…

 The Last Time Around, This Asian Stock Market Gained 990% 

By Tom Dyson

Jim Rogers is one of the world’s best investors. I’ve followed his recommendations and ideas for 15 years, and I’ve never seen him make a mistake…

Now Jim has a new “favorite” investment. Rogers is buying Taiwanese stocks. He started buying in March. How much will Taiwanese stocks rise? We’ve seen a situation like this before…

In 1987, a new president won power in Taiwan and improved relationships with China… just like we’re seeing today. Taiwan’s stock market rose from 1,100 to 12,000 between 1987 and 1990. That’s a gain of 990% in three years.

———- Advertisement ———-
Don’t Lose this 9-Digit Code: 925335AD3

To most people, the series of 9 numbers and letters above mean absolutely nothing.

But if you follow just one simple instruction… and relay this 9-digit Code to your broker… you are entitled, BY LAW, to receive as much as 181% in gains by June 15, 2009.

Surprisingly, the Code has nothing to do with stocks, mutual funds, gov’t bonds, options, or any other investment you’ve likely heard of…

Click here to learn more.
———————————–

The island of Taiwan split from China in 1949 following a civil war. But China still claims Taiwan as its territory and threatens to attack Taiwan from time to time. Officially, the two countries remain at war.

This political uncertainty creates news headlines… and deters investors from buying Taiwan stocks. Look how badly Taiwanese stocks performed over the last two years:

On average, regional stock markets in Asia have risen 90% since January 1, 2000. Taiwan’s stock market actually declined 3% this decade… and 18% since 1997.

Taiwan’s poor stock performance has given the country its lowest stock valuations ever.

The Datastream Taiwan Index has a price-to-earnings (P/E) ratio of 12.8, which is well below the Datastream China Index’s P/E of 20.9 and the Datastream U.S. Index’s P/E of 17.7.

According to Stansberry’s quant analyst, Ian Davis, of all the indexes in the Datastream database, Taiwan is the cheapest major stock index in the world when you compare its current median P/E, price to book, and dividend yield with its own historical norms.

Most people don’t realize commercial relationships between Taiwan and China are booming. Trade between mainland China and Taiwan will probably reach $120 billion this year. And according to the Associated Press, Taiwanese companies have invested more than $120 billion since the early 1990s in mainland businesses.

These businesses supply advanced plant and equipment – like high-tech electrical machinery or rare industrial textiles – to the factories and industries of mainland China.

And the political relationship between China and Taiwan is improving, too. In March, a new president won power in Taiwan. His name is Ma Ying-jeou. Improving relations with China is at the top of Ma’s agenda.

Since Ma’s election, China has reportedly withdrawn half of the missiles it had pointed at Taiwan… And next month, the first direct flights will connect Taiwan and China. Taiwan will allow 3,000 Chinese tourists to visit every day. That’s a big deal. According to Goldman Sachs, tourism may add about 60 to 80 basis points (0.6%-0.8%) to Taiwan’s economic growth.

It’s still illegal for Chinese investors to invest in Taiwan… or for Taiwanese investors to invest in China. But that’s changing, too.

In August 2007, Chinese authorities unveiled a plan for mainland residents to invest in Hong Kong. This was the first time the government had allowed Chinese investors to invest outside Shanghai. The news sent Hong Kong’s Hang Seng Index up 55% in 10 weeks.

I think Taiwan could be one of the next markets Chinese authorities open up to mainland investors. If this happens, we should see a similar pop in Taiwan’s stock index…

Taiwan’s new president knows tying his country economically to China is the best way to prosperity. Opening Taiwanese stock markets to mainland investors is a way to do this. Wu Rong-I, chairman of the Taiwanese stock exchange, says these elections should “pave the way for an agreement with Beijing to ease such restrictions.”

Mainland Chinese investors have $2.3 trillion in savings. To date, they haven’t been able to invest this money outside China or Hong Kong. If they lift these trade barriers, Taiwan’s stock market will soar…The last time Taiwanese and Chinese politicians made progress, you could have made 990% in three years.

I’m not predicting another 990% gain in the Taiwan stock market this time around. But Taiwan is cheap. There’s a catalyst. I think we could easily see a double in Taiwan’s stock index…

Good investing,

Tom

P.S. Taiwan’s main stock index could double. But pick the right Taiwanese stock, and you could make 10 times your money in the bull market.

I think I’ve found the perfect Taiwan investment. This stock pays a 6.3% dividend… and it’s the recommendation in the latest issue of my 12% Letter. To learn more about The 12% Letter, click here.

Source: The Last Time Around, This Asian Stock Market Gained 990%