Taiwan-Politics have been moving in the right direction for the local stock market, with the ruling party winning three of the five city mayor elections in December 2010. Since then, the Taiwan stock market has been an outperformer in the region (the largest exposure by market-over 23% plus in our regional funds and over half in our Greater China Fund). This outperformance is likely to be ongoing over coming months, as we expect the ruling party to continue pursuing populist policies and measures conducive to economic growth, laying the ground for political campaigns that will gather momentum in the second half of 2011 in the run-up to the presidential election in March/April 2012.

Indonesia-Inflation has crept up to 7% YOY and the central bank is behind the curve in raising interest rates. Indonesia is further along the business cycle curve than other ASEAN nation so interest rates will have to rise, as inflation in this cycle likely has already troughed when it touched 5% YOY in late 2010. This market has done very well, and we have already halved our exposure, preferring to stay selective for the time being.

One of the sectors we remain keen on is property, particularly companies with strong land banks for their inflation hedge feature. For historical perspective, over past decades when inflation and interest rates were in double digits, the value of land for property development in Indonesia's has also advanced at double-digit rates p.a., matching or in excess of inflation rates. Domestic politics? We see no negative developments of note

Eoin Treacy's view The Taiwanese market has been trending consistently since late May and broke above the January 2010 high last December. It continues to hold its progression of higher reaction lows and a sustained move below 8750 would be required to suggest a deeper reaction towards the ascending 200-day MA is unfolding.

Indonesia was one of last year's best performers and is a regional leader. It lost momentum from November, having become quite overextended relative to the 200-day MA. The Index found support in the region of the MA three weeks ago and a sustained move below 3300 would now be required to begin to question the consistency of the medium-term uptrend.