Foreign investors could once barely imagine that China would invade neighbouring Taiwan, but with Donald Trump as president of the United States, many view it as a tail-risk scenario they must prepare for, although they cannot find ways to do so. The democratically-governed island has long been a point of contention in U.S.-China relations, which have worsened since Trump entered the White House in January and launched trade tariffs that have rattled markets. Investors fear that if China attempts to take over what it considers “sacred” territory, it risks a war that ushers in the end of Taiwan as a market with its own currency and identity, while the only other alternative is peace and the status quo. For investors, the choice therefore is to stay out completely or stay invested and hope for the best. The risk of any invasion is difficult to hedge, said Mukesh Dave, chief investment officer at Aravali Asset Management, a global arbitrage fund based in Singapore. “You can’t settle any trades, the currency might disappear altogether,” he said. “You either carry on like it’s business as usual, or stay away.” The odds of China invading Taiwan have risen to 12% on betting platform Polymarket from close to none earlier this year. Skittish foreign investors have pulled nearly $11 billion out of Taiwan stocks this year, although much of that was fuelled by concerns over tariffs and the economy and they made a tentative return in May.

Full report : Investors wary of a China-Taiwan conflict happening in near future.