Stocks tumble for a second day

Stocks dropped for a second day on concern trade and investment between Taiwan and China may slow after President Chen Shui-bian (陳水扁) said he supported enacting a referendum law.

The TAIEX declined 64.32, or 1.4 percent, to 4,572.35, extending Monday's 5.8 percent tumble. The total value of trade was NT$56.3 billion, with five shares falling for every one that rose.

"It is widely believed that government funds [yesterday] lent support to heavyweights in the electronics and financial sectors in order to ease pressure," said Fubon Securities Investment Services (富邦投信) manager Cooper Leow.

"Those funds' tactics successfully triggered other investors to hunt for bargains, moving the benchmark index off its lows."

But Leow said it may be premature to conclude that the impact of Chen's remarks on financial markets has reached its end.

"A halt in selling by investors with margin loan positions and to the reduction in turnover would be a better indicator for a steadier bourse."

Formosa Plastics Corp (台塑), the nation's biggest petrochemical company, plunged NT$2.90, or 6.9 percent, to NT$39.30 and was the biggest loser among the benchmark stocks.

EVA Airways Corp (長榮航空), the nation's second-largest airline, tumbled NT$0.90, or 6.7 percent, to NT$12.45.

"We're watching and waiting for a couple of days," said Michelle Kuo, who manages NT$500 million (US$15 million) in stocks at Union Securities Investment Trust Corp (聯邦投信). Kuo said she may buy profitable companies that have been in China for a while "and won't be so affected by a change in government policy."

But Fubon Securities Investment's Leow said cross-strait developments going forward, further indications of the state of the US economy and the outlook for US markets would remain crucial for the local stockmarket.

Delta Electronics Inc (台達電子) rose NT$1, or 2.1 percent, to NT$48.20. The world's biggest maker of computer power-supply systems posted a second-quarter profit that rose a tenth to NT$1.4 billion from the previous year.

Nanya Technology Corp (南亞科技) added NT$0.40, or 1.3 percent, to NT$30.90.

July sales at the nation's second-largest maker of computer-memory chips more than tripled from a year earlier and rose almost two-fifths from the previous month to NT$2.3 billion.

AU Optronics Corp (友達光電) tumbled NT$1.90, or 6.7 percent, to NT$26.30. Makers of flat-panel displays are cutting production by repairing equipment and testing new products as demand slows.

MediaTek Inc (聯發科技) fell NT$2, or 0.5 percent, to NT$387. The nation's second-largest chip designer said July sales dropped a tenth from the previous month to NT$1.7 billion.