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Weighting change fails to give market a boost

The performance of the local bourse yesterday was not as strong as some had expected, as an announced weighting change involving Taiwan's stock market by Morgan Stanley Capital International Inc (MSCI) seemed to have already been figured into valuations, analysts said.

"The [MSCI] issue has been discussed since last year," said Wu Pei-wei (吳佩偉), a portfolio manager who oversees a NT$600 million (US$18.18 million) fund for ABN-AMRO Asset Management in Taipei.

"The bullish effects of the weighting change, if there were any, have already been reflected," Wu said.

The weighting change didn't prove to be much of an enticement for foreign investors either, as they have been diverting their capital away from Asian markets, including this country's, for several months, Wu said.

The TAIEX dropped 12.75 points, or 0.23 percent, to close at 5556.54 points on a rather small turnover of NT$52.67 billion yesterday -- the first trading day since MSCI announced that it would adjust upward the weighting of the local equity market.

MSCI's two-phased weighting adjustment is expected to attract a capital inflow of US$31 billion.

Once the new weighting comes fully into effect, Taiwan would replace South Korea as the country with the largest weighting in both the MSCI Far East ex-Japan index (with a share of 27.2 percent) and MSCI Emerging Market index (20.5 percent), according to a report released by Merrill Lynch & Co yesterday.

"Yes, MSCI's weighting adjustment is bullish for the market over the long term," Wu said.

However, foreign investors may continue steering clear of Asian equity markets in the next few months because of steps by China to slow growth and a looming rate increase in the US, he said.

Large-cap stocks such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) are expected to attract most of the new money, Merrill Lynch said.

TSMC, the world's largest supplier of made-to-order chips, rose 1.6 percent yesterday to NT$43.50, while rival UMC gained 0.9 percent to close at NT$23.10.

Foreign investors bought a net NT$2.08 billion in shares while domestic investment-trust investors and proprietary traders sold off a net NT$1.39 billion, according to the Taiwan Stock Exchange.

"Procomp Informatics Inc's financial crunch is still affecting the market and harming investors' short-term confidence," said Calvin Chen (陳程坤), a manager at Yuanta Core Pacific Capital Management (元大京華投顧).

Chen said that the TAIEX will probably have a slow month next month, as a large number of foreign investors will be on vacation.
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