Taiwan stocks fell for a sixth day yesterday as investors sold electronics stocks on fears that the nosediving NASDAQ may trigger a global high-tech meltdown. But any further correction in high-tech stocks may attract investors searching for value amid the wreckage, analysts say.
"The outlook for global equities in the near term is not good," says Lena Tan, head of Asia research at Fortis Asset Management in Hong Kong. "But the good news is that Asian tech stocks are close to historical low valuations."
Fearing that slower consumption in the US will hit Taiwanese exports hard, foreign institutional investors took profit yesterday, selling a net of NT$6 billion yesterday -- concentrated mainly in technology shares.
"Foreigners are reducing position in the semiconductor stocks because the visibility is so low going forward, particularly in the second quarter," said Jerry Huang, an analyst with Deutsche Bank in Taipei.
Indeed, the benchmark index fell by 174.83 points, or 3.1 percent, to 5,499.86, on turnover of NT$73 billion.
"It will be very difficult for stocks to recover this year," said Henry Lee, head of Hendale Asia, a Hong Kong-based investment firm. "The speed of the recovery will be dependent upon whether the corporate spending recovers."
While the market may fall further, analysts reckon any downward slide may attract value investors, looking for investment bargains.
Taiwan's renewed efforts to restructure its banking system and the sharp interest rate cuts in the US have helped push stocks higher since the Lunar New Year, injecting a rare dose of confidence in the island's mercurial financial markets.
But the rally proved short-lived, as investors realized that economic fundamentals may worsen further before improving, thanks to the aggravated state of the US economy and the resultant sell off in regional stocks.
The growth in the US, Taiwan's largest export market, slowed in the fourth quarter last year to its slowest in five years. GDP grew by 1.1 percent in the fourth quarter, according to the US Commerce Department.
Indeed, the latest carnage, which has made stocks cheaper, was expected, analysts say. Taiwanese shares are therefore unlikely to collapse much further -- unless a much-dreaded global technology meltdown becomes a reality.
The good news is that Taiwan's Central Bank of China (央行) still has adequate room to ease monetary policy -- by cutting interest rates, if things go awry. Local shares are also much less expensive than the tech stocks in the US.
And analysts believe the liquidity situation is already improving in countries like South Korea and Taiwan.
As tech stocks continue to suffer a beating, Taiwan investors could also flee to defensive plays -- or non-technology related stocks -- such as banks and other financial sector companies.
"I see no systemic risk in Taiwan's banking system," says Tan of Fortis Asset Management.
The government too may have to come out with more internal stimulus packages in the future to help offset the slowdown in exports, a move that may help boost domestic sentiment, analysts say.
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