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TAIEX suffers its biggest fall in 21 months

Taiwan stocks tumbled and the TAIEX had its biggest drop in 21 months after Taiwan President Chen Shui-bian (陳水扁) described the nation as a separate nation and supported a referendum on independence.

The benchmark slumped 284.22, or 5.8 percent, to 4636.67, its lowest since Nov. 30. Four out of five shares fell by 6 percent or more while just seven of the 564 shares on the Taiwan Stock Exchange rose. Hon Hai Precision Industry Co (鴻海精密) led declines.

China said Chen's position may seriously undermine the nation's economy and damage relations with the mainland.

"The increased anxiety of the mood of the people" sent stocks lower, said James Chen, who helps manage more than US$2.9 billion in stocks at Fu Hwa Investment Trust Co (復華投信). He said he's waiting for the market to decline further before he considers buying electronics and petrochemical shares.

Hon Hai Precision, the nation's largest computer-parts maker, which has most of its production in China, dropped NT$9, or 6.9 percent, its daily limit, to NT$121. China Motor Co (中華汽車), the nation's largest motor vehicle maker, which owns Southeast Motor Co (東南汽車) with China's Fujian provincial government in southeast China, tumbled NT$3.10, or 6.8 percent, to NT$42.40.

Taiwan's TAIEX slid 14 percent in the week after the remarks. Trading volume of NT$46.4 billion was a third lower than the three-month daily average.

Many investors "pulled money out of the market" and retreated to the sidelines on concern that rising tensions would drive the market further down, said Michael Hsu, assistant vice president at Fuh-Hwa Capital Management (復華投顧).

Taiwan Semiconductor Manu-facturing Co (台積電), the world's largest producer of made-to-order computer chips, lost NT$3.40, or the daily 7-percent limit, to NT$46.50. Rivalling United Microelectronics Corp (聯電) fell NT$0.90, or 3.3 percent, to NT$26.30.

AU Optronics (友達光電), Tai-wan's largest flat-panel maker, was also limit down, falling NT$2.10 to NT$28.20.

Investors also dumped blue-chip tech stocks because of worries growth in the sector would stall amid softening consumer spending in America, Hsu said.

Winbond Electronics Corp (華邦電子) tumbled NT$1.40, or 6.9 percent, to NT$19. The chipmaker posted a greater-than-expected second-quarter NT$2.1 billion loss on a write down on the value of its inventory.

Gigabyte Technology Co (技嘉科技) fell NT$5, or 6.6 percent, to NT$71. July sales at Taiwan's fourth-largest maker of computer-motherboards rose a 10th from a year ago and a less-than-expected 14 percent from June to NT$2.2 billion, the company said.

Silitek Corp (旭麗) fell NT$3.30, or 7 percent, to NT$44.20. The maker of mobile phone keypads for customers such as Motorola Inc said July sales rose a third on year to NT$2.2 billion.

China Steel Corp (中鋼) fell 50 cents, or 3.1 percent, to NT$15.50. Taiwan's largest steelmaker said pre-tax profit from January through July totaled NT$7 billion, accounting for 54 percent of its full-year forecast.

CTB Financial Holding Co (交銀金控) fell NT$1.30, or 6.8 percent, to NT$17.80. Chiao Tung Bank (交通銀行), the state-controlled banking unit of CTB, plans to auction NT$20.6 billion of bad loans next month, cutting its non-performing loan ratio to less than 1.5 percent, from 3.8 percent, a Chinese-language newspaper reported.
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