The tension between China and Taiwan has been a cause for concern, especially in light of recent events. The U.S. government’s sanctions on Chinese entities supplying parts to Russia for its conflict with Ukraine, along with Russian President Vladimir Putin’s visit to China, have raised questions about potential conflicts in the region.
The social mood in Asia, as reflected in stock market indexes, plays a crucial role in determining the likelihood of conflict. Negative social mood often leads to aggressive behavior from countries. The recent military drill conducted by China near Taiwan, in response to comments made by Taiwan’s new head of state, has added to the already high tensions in the region.
Despite the provocative actions, China ended the military drill after just two days, indicating a desire to limit the scope of conflicts. This mirrors similar situations in other regions, where conflicts were quickly de-escalated to prevent further escalation. However, the negative social mood in China increases the risk of aggression or miscalculations, as highlighted by geopolitical observers.
The positive mood in Taiwan, especially amidst the global tech boom, is reflected in the Taiwan Index, which continued to rise during the military drill. On the other hand, the long-term pattern of the Shanghai Composite Index reflects the negative mood in China, raising concerns about potential aggressive actions.
Looking at long-term charts, we can gain perspective on the current situation. The recent proxy battle between Russia and Ukraine is seen as part of a new cold war between the U.S. and its allies against a China-dominated axis of autocratic states. Historical patterns suggest that conflicts often arise during corrective periods in stock market indexes, such as the one seen in the MSCI Asia-Pacific Ex-Japan Index and the MSCI World Ex-U.S. Index.
As tensions continue to simmer in the region, it is important to closely monitor stock market indexes for signs of potential conflicts. Understanding Elliott wave price patterns and historical precedents can provide valuable insights into the possible outcomes of the current geopolitical situation.