AAPL Apple Inc

By Ese Erheriene 

Apple Inc. and U.S. President Donald Trump are going head-to-head for influence over one of Asia's key export economies. And so far, Apple is winning.

Taiwan's stock market has been on a roll the past few months, undeterred by Mr. Trump's ascent to the U.S. presidency and his harder line on China and trade. On Tuesday, the market ended at a fresh 23-month high.

The benchmark Taiex index has risen 11% since mid-September, according to FactSet. This would make it the 10th best-performing stock market globally during the period, in U.S. dollar terms. Since its early-2016 bottom, the Taiex is up nearly 30%, outstripping gains of 19% in Shanghai and 18% in South Korea.

The performance highlights global markets' resilience to geopolitical events that could threaten to disrupt the good times. Mr. Trump has pledged a more unpredictable foreign policy that risks upturning longstanding diplomatic and trade ties--including his early decision to question the "One China" policy that has underpinned Sino-U.S. relations for decades.

But investors have focused instead on the prospect of improving economic growth and a fading sense of crisis in China. In Taiwan, they are focused on the iPhone.

The island's equities of late have "been doing well for a couple of reasons," said Arthur Kwong, head of Asia-Pacific equities at BNP Paribas Investment Partners. "On top is Apple."

Apple's share price has jumped nearly 25% over the past six months amid hopes for a big year for the iPhone, which celebrates its 10th anniversary in 2017. A number of Taiwan's technology stocks are along for the ride.

Among them, Largan Precision Co., which manufactures dual casings for the iPhone, added 30% since mid-September. Hon Hai Precision Industry Co., or Foxconn, which assembles the iPhones, was up 18%. Catcher Technology Co., which supplies casings, gained 12%.

Taiwanese tech stocks that supply Apple make up more than 25% of the Taiex's weighting, with Apple accounting for up to 50% of the companies' revenues. The gains have helped drive the index back toward the 10000-point level that it hasn't been able to solidly break through for two decades.

They have also helped boost Taiwan's attractiveness for foreign-equity investors. Last month, foreigners bought a net $1.6 billion in Taiwanese stocks, the most since August, according to data from Credit Suisse. For the first 10 weeks of 2017, Taiwan had the highest amount of net foreign buying among emerging markets in Asia excluding China at $2.8 billion.

"There's a move to own Apple supply stocks," said Randy Abrams, a semiconductor analyst at Credit Suisse. Many emerging-market funds can't buy directly into Apple, so they look to the supply chain for alternatives, he said.

Meanwhile, Mr. Abrams called Taiwan's strong stock gains noteworthy given Mr. Trump's tough talk on trade tariffs. The country's stock market is typically more affected by trade issues as exports make up around 70% of Taiwan's economy.

Beijing also has been ramping up its efforts to isolate the island, which it considers Chinese territory, in the months since the inauguration of President Tsai Ing-wen, leader of a party that favors Taiwan independence.

Still, the effects of those developments on equities have been muted. In December, after then President-elect Trump spoke on the phone with Ms. Tsai-- the first time a U.S. president or president-elect has spoken with the leader of Taiwan since diplomatic ties were cut off in 1979, much to the ire of Beijing--the Taiex reacted, but with a gentle 0.3% decline.

"We haven't seen [Trump's] threats carried through...[and] the Taiwanese companies are very much required in the supply chain," said Andrew Gillan, head of Asia ex-Japan equities at Henderson Global Investors, to explain the gains despite political uncertainty.

Taiwan's benchmark stock index has logged the biggest gains among Asian emerging markets over the past six months and hasn't closed down 1% or more in any session since November. The current 82-session streak is easily the index's longest since at least 1986, according to Wall Street Journal market data. The Taiex dates to 1966.

A bigger risk may be that Apple can take as well as give. In September, the Taiex rose a combined 3% in the three sessions leading up to the Sept. 7 launch of the iPhone 7. But the handset didn't have much in the way of a wow factor, and the Taiex fell 3.9% the following week as Apple's share fell.

Fiscal 2016, which ended in September, marked the first time Apple recorded lower year-over-year iPhone sales. Investors are betting Apple will deliver more than just incremental improvements for its next iPhone. If they are wrong, Apple's share price could suffer and damp enthusiasm for Taiwan's tech stocks.

"If we have any downward demand shock, we could see disappointment," said Credit Suisse's Mr. Abrams.

Kevin Kingsbury contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

March 21, 2017 08:20 ET (12:20 GMT)

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