Share prices yesterday continued their plunge for the third consecutive day, reaching their lowest point in three months in intraday trading following a huge net sale by overseas investors on Thursday.
After hitting a three-month low of 5,899.59, the TAIEX closed down 0.78 percent at 5,925.54 on turnover of NT$68.61 billion (US$2.07 billion), according to the Taiwan Stock Exchange (TSE). The index has shed about 180 points from its highest level of 6,105.35 points this week.
Foreign investors' net sales amounted to NT$4.14 billion yesterday, following their huge net sale of NT$12.42 billion on Thursday, the eighth-largest daily net sale on record, the TSE said.
"The local bourse was weighed down mainly by the weakening US stock market and the looming surge in the already high prices of crude oil futures, as another hurricane is hitting the US, prompting foreign investors to liquidate their shares at hand," said Daniel Tseng (曾建詮), a manager at Fubon Securities Investment Services Co (富邦投顧).
While a sell-off by overseas investors was not unique to Taiwan, domestic investors' weakening confidence in the local bourse made the plunge bigger than in other Asian countries like South Korea or Hong Kong, he said.
Tseng said he does not expect a substantial rebound to appear until next month, when companies release their likely better-than-expected third-quarter results.
Midstream and downstream electronics companies, like manufacturers of notebook computers and consumer-electronics products, are currently more popular investment targets as their margins improve and with demand expected to rise in the traditionally busy fourth quarter, Tseng said.
However, Morgan Stanley said the investment outlook for the end of this year does not seem rosy, seen against the backdrop of the December elections, a narrowing trade surplus due to growing energy costs and increasing company migration to China, and a depreciating NT dollar.
"In this unexciting liquidity environment, we expect the TAIEX will find it difficult to surpass its recent highs near the 6,500 level," Morgan Stanley's Taiwan strategist Dickson Ho (何資文) said in a report released on Thursday.
An outflow of capital is another issue the local market will have to deal with, according to the US investment bank.
Taiwan has seen a constant outflow of capital totaling US$77 billion in the past five-and-a-half years, which almost offset foreign investors' net purchases amounting to US$79.2 billion over the same period, driven by unstable cross-strait relations and a high inheritance-tax rate, Ho said.
Since the inflow of foreign funds may slow in the next few months, Taiwan's stock market performance will still be lackluster if domestic liquidity is not actively pumped into the stock market, he said.
However, Thomas Yeh (