China-Taiwan diplomatic tensions escalate

What happened: Taiwan test-fired US mobile launchers into waters directly facing China for the first time, escalating diplomatic tensions. China responded by banning four New Zealand MPs for a year due to their visit to Taiwan, citing a "red line" crossing. A former Reagan advisor noted the widespread belief in China that Taiwan is part of its territory.

Market impact: The tech and semiconductor sectors, heavily reliant on Taiwan, could face supply chain disruptions and geopolitical risk premiums. Companies like TSMC and Micron may see valuation repricing. New Zealand's trade relations with China might also be affected, impacting exporters.

What to watch next: Taiwan's upcoming presidential election in January 2024, as the result could further influence cross-strait relations. Additionally, monitor China's military activities and potential countermeasures, such as increased exercises or economic pressure on Taiwan. Lastly, track US-China trade talks for any progress that could ease tensions.