Cautious investors are turning to traditional industry shares as they search for a safe harbor because stock regulators' stringent inspections of corporate financial results have depressed investor's confidence in high-tech firms, analysts said yesterday.
The shift came after a string of local technology firms were sus-pended from trading on credit due to alleged financial frauds, including Summit Computer Technology Co (皇統科技) and Infodisc Technology Co (訊碟科技).
National Aero-space Fasteners Corp (宏達科技) was the latest example. It was restricted to cash only transactions as of today because the income statements of the maker of fasteners for aircraft parts are "in doubt," according to a statement from the Taiwan Stock Exchange.
"Investors are buying more traditional industry companies with healthy fundamentals as they are getting away from tech firms following a series of financial scandals involving electronics firms," said Chien Po-yi (簡伯儀), an analyst with Jih Sun Securities Investment Consulting Co (日盛投顧).
Commodity and plastics sectors such as China Steel Corp (中鋼) were among the heavily trading shares, Chien said.
National Aero-space Fasteners stock has fallen 28.6 percent since the beginning of the month. It closed at NT$8.1 yesterday.
The exchange's aggressive moves to unearth problem companies is dampening investors' confidence in tech shares, Chien said.
The exchange will choose 10 percent of its 677 traded companies for regular financial examinations this year in a move to safeguard investor's rights, said exchange vice president Chiu Chin-ting (邱欽庭) yesterday.
In the past, the exchange probed the accounts of just 5 percent of the listed companies.
As a result, trading of tech shares dropped drastically to make up just 40 percent of the NT$94.37 billion turnover yesterday, from 60 percent previously, Chien said.
"We believe the negative impact on the tech sector will be short-lived, as investors are reacting less vigorously to those financial scandals. They know the crackdown on companies hiding weak results means that only healthy companies will be able to trade on the stock market," said Andrew Teng (鄧安瀾), an analyst with Taiwan International Securities Corp (金鼎證券).
Though trading of tech stocks was limited, investors have stop-ped dumping electronics shares, Teng said.
"We even saw overseas fund managers start to increase electronics holdings after heavy sales in the past few months," Teng said.
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