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Investors Brace for China-Taiwan Conflict Risks, But See No Safe Hedge

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Foreign investors are increasingly forced to factor in the once-unthinkable: the possibility of China invading Taiwan, a scenario made more plausible amid rising U.S.-China tensions under President Donald Trump and a new wave of global trade nationalism. Yet, despite heightened geopolitical anxiety, investors see little to no viable strategy for hedging against a full-scale conflict over the democratically governed island.

“You can’t settle any trades, the currency might disappear altogether… you either carry on like it’s business as usual, or stay away,” said Mukesh Dave, CIO of Aravali Asset Management.

War or Status Quo: A Binary Outlook

Investors now view the China-Taiwan standoff as a binary risk:

  • War, which would likely obliterate Taiwan’s status as a stable investment market.

  • Peace, maintaining the status quo under continued diplomatic ambiguity.

Rising Odds and Market Reaction

  • The Polymarket platform now pegs the odds of an invasion at 12%, up from near zero earlier in the year.

  • Taiwan stock outflows totalled nearly $11 billion in 2024, fueled in part by U.S. tariffs.

  • Taiwan’s benchmark index (.TWII) is down 6% year-to-date.

Even Goldman Sachs’ Cross-Strait Risk Index, which tracks media references to tensions, has been steadily climbing since Trump’s election win in late 2024.

“If aggression occurs, the investment decision becomes binary: stay exposed and absorb extreme volatility, or exit swiftly to preserve capital,” said Steve Lawrence, CIO of Balfour Capital Group.

TSMC at the Heart of the Dilemma

The central pillar of Taiwan’s market remains Taiwan Semiconductor Manufacturing Co (TSMC):

  • Valued as the crown jewel of the global chip industry

  • Supplies giants like Apple and Nvidia

  • Has been both a market driver and a geopolitical flashpoint, especially as Trump’s tariff policies increasingly target advanced tech

“TSMC is so big that the expectation is the U.S. will defend Taiwan — and defend it strongly,” said Dave.

However, Trump’s inconsistent tariff maneuvers, including temporary delays for negotiation leverage, have spooked investors and underscored Taiwan’s exposure to external political will.

Diverging Views on Risk

While global investors appear increasingly concerned about cross-strait instability, some local voices remain sceptical:

“We shouldn’t interpret this from a geopolitical risk perspective. The key issue is the tariffs,” said Li Fang-kuo, chairman of Uni-President’s securities advisory unit in Taiwan.

Others, like Rich Nuzum, global strategist at Mercer, recommend broad diversification and crisis stress-testing as the only realistic tools for institutional clients.

“There is no hedge for war,” Dave noted plainly. “But there is stress-testing for fear.”

With Taiwanese President Lai Ching-te pledging peace and Beijing accusing him of separatism, tensions remain unresolved. Investors face a stark choice: stay exposed to Taiwan’s tech-driven growth, or exit amid escalating uncertainty.

Malaysia Aims to Become Energy and Chip Manufacturing Hub, Says PM

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Malaysia is setting its sights on becoming a global leader in energy and semiconductor manufacturing this year, building on a surge in investments and a favorable economic outlook, according to Prime Minister Anwar Ibrahim. The country is positioning itself as a key player in Southeast Asia, attracting foreign investors as it stands out for its economic stability, robust growth, and a strong currency—factors that have set it apart from regional peers facing political and economic challenges.

At an economic forum on Thursday, Anwar highlighted the country’s strong recovery in 2024, fueled by significant investments, particularly in renewable energy and artificial intelligence (AI) infrastructure. He noted that inflation was stable, the Malaysian ringgit had remained strong, and the stock market had emerged as the region’s top performer.

For 2025, the Malaysian government aims to capitalize on the country’s strategic geographical position to strengthen its role in energy, talent, and supply chain diversification. Anwar expressed plans to refine Malaysia’s capabilities in key sectors such as oil and gas, semiconductors, and Islamic finance to establish the country as a global leader in each of these industries.

Economy Minister Rafizi Ramli also shared Malaysia’s ambition to produce its own graphics processing unit (GPU) chips, catering to the growing demand driven by AI and data center development. “We are hoping that we can start producing made-by-Malaysia GPUs and chips in the next five to 10 years,” Ramli stated.

As a major player in the semiconductor industry, Malaysia accounts for 13% of global testing and packaging. The government is targeting over $100 billion in investments for the sector, capitalizing on its potential to attract business from Chinese chip firms seeking diversification. Additionally, Malaysia has secured multibillion-dollar investments from leading companies such as Intel and Infineon, alongside digital investments from tech giants like Google. These moves have contributed to the country’s impressive economic growth in 2024, surpassing market expectations and making the ringgit one of Asia’s top-performing currencies.

 

Emirati Billionaire Sajwani Foresees Increased Gulf Investments into U.S. Under Trump’s Second Term

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Emirati billionaire Hussain Sajwani, founder of DAMAC Properties, predicts a surge in Gulf investments into the U.S. as President-elect Donald Trump begins his second term. Sajwani, a long-time business partner of Trump, announced plans to invest $20 billion in data centers across eight U.S. states, speaking at Trump’s Mar-a-Lago resort in Florida. The real estate mogul highlighted the pro-business policies of the incoming administration, which he believes will attract more foreign investments, particularly in sectors like artificial intelligence (AI) and technology.

Sajwani, whose firm owns the only Trump-branded golf course in the Middle East, stressed that Trump’s policies would foster a more favorable investment climate, aiding in future opportunities for growth in the U.S. Sajwani’s investments extend beyond real estate; he is also an investor in Elon Musk’s SpaceX and xAI. In December, Sajwani celebrated New Year’s with Trump and Musk, and he was invited to the presidential inauguration on January 20.

According to Forbes, Sajwani’s net worth stands at $5.1 billion. Trump’s business dealings with the Gulf are not limited to Sajwani; Trump-branded projects are also under construction in Saudi Arabia and Oman, and Gulf state-owned funds have investments in Jared Kushner’s firm.

As Gulf countries, particularly the UAE, ramp up investments in AI to become regional leaders, Sajwani’s DAMAC subsidiary EDGNEX plans to build and operate data centers with a 2,000-megawatt capacity across Texas, Arizona, Illinois, and five other states. Sajwani emphasized that favorable access to land, energy, and regulatory processes in the U.S. were key factors in the decision to focus on these locations. The data centers will be funded largely through debt, with DAMAC covering the remaining 30% from its balance sheet.

The proposed investment deal is expected to undergo scrutiny by the Committee on Foreign Investment in the U.S. (CFIUS), although Sajwani expressed confidence that the incoming administration would streamline regulatory processes to expedite the approval.