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 (
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 (
"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 (
"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 (
The analysts, however, urged the government to respect the market mechanism. They said they didn't want to see government intervention too soon.
Kurz said such intervention would only create false comfort for investors.
The government should let the selling pressure be released and intervene only if the index slides to around 6,000 points, Hsieh said.
As for the New Taiwan dollar, Hsieh said the unit may weaken against the US dollar in the short-term and may hit as low as NT$33.4. He didn't give a timeframe for this prediction.
The NT dollar will strengthen against the greenback in the long run in line with other Asian currencies, Hsieh said, predicting the unit rise to NT$33.05.
The NT dollar declined NT$0.025 to close at NT$33.253 against the US dollar on the Taipei foreign exchange market Friday after the assassination attempt on President Chen Shui-bian (陳水扁).
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