Short-term fall seen for stock market

The political turmoil following the presidential election may hurt investor confidence and the nation's stock market when it opens today, analysts said yesterday.

But the impact will be short term and the market will soon rebound to reflect the nation's sound fundamentals, analysts said at an investment seminar in Taipei a day after the election.

"The stock market will have a strong response to the political turbulence," said Hsieh Chin-ho (謝金河), executive director of the Chinese-language monthly Wealth Magazine. "The TAIEX may fluctuate in a range of 1,000 points during this period."

The TAIEX closed up 28.06 points, or 0.4 percent, at 6,815.09 points on Friday on a turnover of NT$174.79 billion.

As investors may rush to unload shares over the political disputes, Hsieh estimated the benchmark index may fall as low as 5,800 points, the level at which it started the year, over the next few days.

Investors also seemed worried that domestic and international fund managers may pull their money out because of the uncertainty. But Peter Kurz, chief executive officer of Insight Pacific Research (月涵投顧), disagreed.

"The stock market's fundamentals are still sound and healthy ... and foreign investors who care more about the fundamentals are upbeat about the market in the long term," said Kurz, who was invited as a guest speaker at the seminar yesterday.

Foreign investors who made around NT$80 billion by selling shares before the election would not increase the selling pressure next week, he said. Instead, they may purchase shares cheaply using the profits they made earlier, he added.

Kurz said he believed the negative impact may last no more than a quarter as long as the people's doubts about the election outcome can be dispelled in a transparent and just way.

Both Hsieh and Kurz said foreign investors' confidence in the nation's investment environment would not be affected because of Taiwan's strong economic base.

But the expectation of a market surge today had Chinese Nationalist Party (KMT) Chairman Lien Chan (連戰) won the election is gone. Also putting downward pressure on shares is Lien's claim that Saturday's election was unfair and the vote should be nullified.

"It is difficult to estimate how serious the damage that the political issues will be to the market ... But Monday is the key to seeing how bearish the market will be," Hsieh said.

Stocks with links to the pan-green camp are expected to rise whereas pan-blue and Chinese-concept stocks like shippers and air carriers will experience selling pressure as the outcome of the election defied the market's expectations, he added.

Kurz agreed, saying that there will be some disappointment selling pressure from margin calls this week, as investors were generally hoping for a Lien victory because of the perception that he would foster a closer and less confrontational relationship with China.

Margin calls refer to investors being forced to sell shares in order to pay back loans that had been used to buy the stocks.

Kurz stressed that it was also a good chance for investors to do bottom-fishing if the index drops, he said, without estimating on how low the TAIEX could go.

While investors expect support from the government's NT$500 billion National Stabilization Fund (國安基金), Minister of Finance Lin Chuan (林全) announced yesterday that the government had no plan to use the fund unless the situation gets out of control today.