The stock market tumbled to its lowest level in almost three months, puzzling market watchers as to the reason for the 3.7 percent slide. All major news agencies -- quoting dealers and analysts -- cited different reasons for the 215.13 point drop to 5,574.71.
About 33 shares fell for each one that rose. The total value of trade was NT$59.4 billion (US$1.7 billion), less than half the six-month daily average of NT$123.5 billion.
According to Bloomberg news in Taipei, the drop was triggered by a report that stated the stock exchange may halt margin trading in stocks whose net worth last year fell below their nominal value.
"Canceling margin trading on those stocks will put lots of selling pressure on those stocks as investors get out," said Mahavira Chang, who helps manage NT$300 million (US$8.7 million) in stocks at Truswell Securities Investment Trust Co (
US news agency Associated Press said Taiwan shares ended sharply lower yesterday as fragile market sentiment was further weakened amid various reports about upcoming military exercises in China.
Analysts said reports by Hong Kong media over the weekend that China will soon start military drills along coasts facing Taiwan also weighed on sentiment, AP reported.
The French news service Agence France-Presse (AFP) interpreted the decline differently, saying that fresh worries over another terrorist attack on the US had spurred the plunge.
Meanwhile the government mouthpiece -- the Central News Agency (CNA) -- said the ongoing "persistent drought" was to blame for the market's fall.
But AFP did find some common ground with the Central News Agency, saying that despite anticipation of government support as President Chen Shui-bian (陳水扁) celebrates his second year in office, some factors proved to be unfavorable to the stock market.
"Investors who built portfolios earlier dumped holdings on disappointment that there was no apparent government support" when Chen celebrated his second anniversary of inauguration, a dealer said in the AFP report.
The index fell 14 percent in the past month on concern a US recovery may lag expectations and as a local water shortage boosts the cost of providing water to chipmakers and other industries. The US is Taiwan's second-largest trading partner.
The market paid little attention to a government report last Friday that Taiwan's economy grew 0.89 percent in the first quarter, following three consecutive quarterly contractions.
"Investors cashed out of the bourse regardless of the economic growth reported in the first quarter and the upward revision for the whole year as those data only showed mild rather than any major recovery," the dealer said.
Oliver Fang, a fund manager at National Securities Co (
"Market sentiment is fragile," said Justine Lin at MasterLink Securities Co (
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