TAIEX drops 2.2% amid SARS fears

Stocks fell for a third day, led by Quanta Computer Inc (廣達電腦) and Asustek Computer Inc (華碩電腦) after the government reported the first death from severe acute respiratory syndrome (SARS) in the country. The index posted its biggest three-day decline since September 2001.

Chipmakers Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) also declined after Citigroup's Smith Barney division cut its industry recommendation on concern demand will slow. TSMC may say today first-quarter profit fell 56 percent because it invested too much in production equipment.

The TAIEX tumbled 94.04, or 2.2 percent, to 4,139.50. The benchmark index has fallen 9.3 percent over the past three days, its steepest fall since the three days that ended Sept. 19, 2001. Only 55 of the 610 stocks on the Taiwan Stock Exchange gained.

MSCI Taiwan futures for April delivery in Singapore declined 1.6 percent to 176.90. The Taiwan Futures Index dropped 2 percent to 4,125.

"We believe many investors have overlooked potential demand implications" of SARS, Kirk Yang, an analyst at Smith Barney, said in a report.

"Technology spending is closely correlated with economic growth, PC and handset demand in China could be negatively affected," he said.

Citigroup has cut its forecast of China's economic growth to 6.7 percent from 7.6 percent, the report said.

TSMC fell NT$1.5, or 3.3 percent, to NT$44.

Citigroup analyst Clark Westmont cut his recommendation for the chip industry to "underweight" from "market weight." Inventories of chips have risen and share prices already reflect earnings prospects, Westmont said in a note to clients.

Quanta Computer, which makes notebook computers at a plant near Shanghai, fell NT$2, or 3 percent, to NT$64. Asustek, which makes more of its motherboards in China, fell NT$3, or 4.3 percent, to NT$66.50.

"Investor confidence has been destroyed by the SARS outbreak," said Reming Yu, chief investment officer at Prudential Securities Investment Trust Co (保誠投信). "The market is collapsing and will need to fall further before investors can feel safe in buying stocks again."

CMC Magnetics Corp (中環) rose NT$0.10, or 0.6 percent, to NT$16.40. BenQ Corp (明基電通) fell NT$1.7, or 4.5 percent, to NT$35.80.

Powerchip Semiconductor Corp (力晶半導體) fell NT$0.55, or 6.5 percent, to NT$7.95. It said it turned to a first-quarter loss of NT$2 billion after sales tumbled. The company had net income of NT$611 million a year earlier. Sales, previously announced, fell 18 percent to NT$3.1 billion from NT$3.8 billion.