Taiwan inked services agreement with China

Here are 7 sectors set to benefit.

According to Bank of America Merrill Lynch, China and Taiwan on Friday signed a landmark agreement opening their services markets to each other during the ninth cross-strait talks. 

The beneficiaries are financials, medical services, telecom, tourism, insurance and related services, e-commerce and funeral services. This signifies a major breakthrough as cross-strait ties further expand to broader spectrum and serves as a precursor for the signing of more cross-strait agreements in the near term.

Here's more:

We expect the market to read neutral to positive on the news, as this discussion has been ongoing for a while. We expect these ECFA agreements to initially stimulate capital investment, thereby driving wage growth, consumer sentiment and domestic spending.

After the service agreement signing, both governments will continue the negotiation of commodity trade agreement to complete the final stage of ECFA, which is likely to include ~80% of non-agricultural products into the cross-strait tariffexempted list.

The products in focus will be more on the non-tech side, including auto parts, bicycles, plastic/petrochemical products, and machinery.

The government expects to complete negotiations by year-end 2013, but in our view, based on its track record, this could be delayed by one quarter to early 2014. After the ECFA signing is complete, Taiwan could be better positioned to sign additional free trade agreements with other countries.