As the US-led war against Iraq enters its second week, uncertainty about the war's length is rattling investors in the nation's equity markets, economists said yesterday.
If the war is protracted, the nation's stock market and foreign currency market will be hard hit, Yang Ya-hwei (
Both markets have fluctuated along with the war's ups and downs carried on live TV news reports, she added.
"The Iraqi war may last longer than expected," Hsu Chen-min (
Hsu added that, with the US and UK facing strong Iraqi resistance, more financial experts have begun to express doubts about a quick war.
Yang reiterated her think tank's earlier estimates that the nation's economic growth rate this year may drop to 2 percent if the war goes past six weeks, and further slide to 0.3 percent if the war lasts longer than three months.
The combination of the war and rising concerns about the outbreak of severe acute respiratory syndrome (SARS) drove the TAIEX down 37.23 points yesterday, or 0.82 percent, closing at 4,477.01 on turnover of NT$32.56 billion.
Local investors are for the most part cautious.
"The war is so unpredictable that I don't dare put down more money on stocks today," a female investor in Taipei said yesterday, requesting not to be identified.
Uncertainties over the war also scared away a 66-year-old investor, who said that "the war may further drag the TAIEX down and I'm still waiting for it to bottom out."
The investor, surnamed Chen, said that concerns about the outbreak of SARS have been taken into consideration, but that the war may still pose a threat to the global economy.
But a 40-year-old individual investor surnamed Chen was upbeat about the TAIEX yesterday, saying the stock market is on an upward movement after having previously reacted to the war and the respiratory disease.
Aside from the war's duration, investors are worried about post-war reconstruction costs as well as possible retaliation from terrorist groups once the war has ended, said David Hong (
Hong urged investors to exercise caution, but added that potential oil price hikes are likely to hurt the economy in China, 60 percent of whose oil imports are from the Middle East.
"If China's economy performs poorly, so will Taiwan's," Hung said.
Rising oil prices will, moreover, increase costs for Taiwanese companies which export to the war zone.
Wu Chung-shu (吳中書), a research fellow at the Institute of Economics at Academia Sinica, said yesterday, however, that even if the US eventually claims victory, it will still be a lose-lose situation for both US President George W. Bush and Iraqi President Saddam Hussein.
The US may be overburdened with huge military expenses and post-war reconstruction costs, Wu said.
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