Mon, Jan 24, 2005 - Page 10 News List

Slow week looms for investors

ON THE SIDELINES Analysts said that investors would steer clear of the market ahead of the holiday, on concerns about new accounting rules and eroding profits

By Lisa Wang  /  STAFF REPORTER

The stock market is set to experience another dull week as investors may choose to sit on the sidelines ahead of the Lunar New Year holiday, analysts said yesterday.

The weakening US market and lingering concerns over the implementation of new accounting rules are factors that could keep investors from trading, they said.

Worries about potential profit erosion were investors' focus last week, but the effect is expected to spread further, analysts said.

"We already saw the initial impact last week as investors dumped shares with hefty long-term investment positions, or those relying on non-operating income to make profits," said Kevin Chung (鐘國忠), a deputy manager at Jih Sun Securities Investment Consulting Co (日盛投顧).

The nation's stock regulator requested that companies trading in Taiwan's stock markets disclose possible losses from long-term investments, or from fixed assets on quarterly balance sheets, beginning this year. The implementation is one year ahead of the original schedule.

Walsin Lihwa Corp (華新麗華), a local electrical cable supplier, was a marked case, Chung pointed out. The company may have a big chunk of last year's earnings from non-operating income.

Walsin Lihwa shares tumbled 11 percent to NT$14.5 last week on the Taiwan Stock Exchange.

"Caution on potential profit reduction has just began to hurt investor sentiment," Chung said. "The effect will expand in the near future."

Wu Pei-wei (吳佩偉), a portfolio manager who helps oversee a NT$600 million fund for ABN AMRO Asset Management in Taipei, said that uncertainty over the impact of new accounting rules may curb investment.

"Investors will move to the sidelines before the Lunar New Year holidays," Wu said, adding that a flurry of corporate earnings is scheduled to be announce after the long vacation.

In addition, weakening US markets, especially the tech-heavy NASDAQ, may be a further drag on already sagging investor sentiment, Wu said.

For the year to date, the blue-chip Dow Jones Industrial Average is down 3.62 percent and the Nasdaq is down 6.49 percent.

Chung said tech shares, which account for about half of the trading volume on the Taiwan Stock Exchange, would remain weak recently as the first quarter is typically the slow season for electronics companies.

The TAIEX may seesaw between 5,730 and 5,950 points this week with thin turnover of around NT$4 million to NT$5 million, he predicted.

The TAIEX closed at 5,848 last Friday on turnover of NT$46.37 billion.

But Chung still saw some bright spots. He suggest buying stocks in the traditional sector, such as Taiwan Cement Corp (台泥) and King's Town Construction Co (京城建設), at lower prices.

Local companies with fixed assets such as Taiwan Fertilizer Co (台肥) are good long-term picks as they will benefit from a new tax break, ranging from 20 percent to 40 percent, for long-term land owners over 20 years, he said.

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