Analysts unimpressed with Chen speech

The local bourse is expected to react flatly to President Chen Shui-bian's (陳水扁) Double Ten National Day speech yesterday, which focused mainly on domestic reform schemes but lacked any positive ideas on improving cross-strait relations, which would have been a stimulus to the market, analysts said yesterday.

"President Chen's address pushing financial and political reforms may stress his resolve in the face of an apparent decline in support," George Hsieh (謝文雄), a fund manager at Capital Investment Trust Corp (群益證券投信) said in a phone interview yesterday.

The speech will probably provide more of a boost to the year-end elections than to the stock market, since he didn't say anything that would boost cross-strait relations, such as direct links, Hsieh said.

An analyst at Invesco Taiwan Ltd (景順投信), who asked to remain anonymous, said the company gave a neutral rating to Chen's speech and expected to see a lukewarm response to the speech on the local bourse today.

Both analysts, however, pre-dicted that the market would do better in the near future, thanks to the overall brighter-than-expected sales results from high-tech players in August and last month.

Bolstered by the healthy fundamentals, the benchmark index could stay within the 6,000 points range this week, Hsieh said.

The TAIEX closed down 13.97 points, or 0.2 percent, at 6,081.84 last Friday and lost 0.6 percent overall last week.

In his speech Chen vowed to push planned reforms in six areas -- finance, taxation, the 18-percent preferential interest rate given to retired public servants, party assets, the media and constitutional amendments.

The completion of the second phase of financial reform to consolidate the banking sector was top on his agenda.

"The second-stage financial reform has met [few] obstacles so far, and there is room for improvement in implementation. But the direction of the policy is correct," Chen said.

The government needs to reach its target on schedule if the financial sector is to face the challenges posed by globalization, he said.

Chen's remarks came after a string of heated questions about his financial reforms. Last week Democratic Progressive Party Legislator Julian Kuo (郭正亮) criticized the policy, saying insufficient planning meant the reforms would only benefit the rich.

Earlier in the week, the legislature's Finance Committee passed a resolution to stop the government from selling its holdings in state banks. The Executive Yuan said the committee's move was not binding on current policy.

Given that financial reform is not subject to as much supervision in the legislature as other policies, Chen may be eager to complete the program, one of his policy packages that does have a timetable, so it can be a milestone for his time in office, said Shirley Yang (楊慶祺), Invesco Taiwan's fund manager.

His remarks explained the government's insistence on moving forward with its plans and may steady investor confidence in weakening finance stocks, Yang said.

The government plans to halve the number of state banks to six by year's end and the number of financial holdings to seven by the end of next year. Its efforts, however, received a setback when the sale of Taiwan Business Bank (台灣企銀) failed last month, which may foreshadow trouble disposing of the state's holdings in the Central Trust of China (中信局).