The Gap between Perception and Reality

* Despite suffering a devastating electoral defeat on November 29, the appointment of the former vice Premier, Mao Chi-kuo, to head the Cabinet as the next premier has been perceived by most that Taiwan President Ma Ying-jeou still wants to retain power for as long as possible.

* Worse yet, the "old-look" administrative team fell far below the general expectation that the ruling Kuomintang (KMT) would attempt to regroup with fresh faces and gain some traction amidst plummeting public support. It just didn't happen.

* Unless the KMT can regain credibility and confidence from the electorate--whether through policy or personnel reshuffle--in the next 12 months, the prospects are not particularly bright heading into the next legislative (January 2016) and presidential elections (March 2016).

* We expect progress, if any, in cross-Strait relations to move at a snail's pace in 2015.

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The Week After

* Following the devastating defeat on November 29, Taiwan President Ma Ying-jeou is expected to resign as ruling KMT chairman on December 3. Election for a new chairman will take place in roughly a month, around early- to mid-January 2015.

* Current Vice President Wu Den-yi and New Taipei City Mayor Eric Chu remain the frontrunners to succeed Ma as KMT chairman. In addition, Wu and Chu will likely vie for party nomination for the presidency next year. As such, intra-party unity remains a concern if the KMT wants to have a shot in the March 2016 presidential election.

* On the other hand, DPP Chairwoman Tsai Ing-wen has become the undisputed center of power in the opposition party. She is a shoo-in to win the DPP's presidential nomination for the 2016 race. 

* Under the current political climate, the DPP has a clear advantage over the KMT in the next presidential and legislative elections. However, the KMT is down but not out. The 2016 elections are still 15 months away, which is a lifetime in politics of any color. A lot can still happen.

* Beijing cannot be happy with the election results. While some cross-Strait exchanges will likely slow down, efforts to reach out to the DPP, though not party-to-party, will intensify. Ideological differences, however, will make the "getting-to-know-you" process difficult and the progress slow.