Chen speech shakes up investors

"The president's New Year address was disappointing to investors expecting to see a policy toward better relations with China."

Tom Fu, assets manager at PCA Securities Investment Trust

The nation's stocks suffered their biggest declines in more than two months after a speech on Sunday by President Chen Shui-bian (陳水扁) focused on a new constitution rather than closer ties to China. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and China Steel Corp (中鋼) both fell.

"The president's New Year address was disappointing to investors expecting to see a policy toward better relations with China," said Tom Fu, who manages US$63 million in assets at PCA Securities Investment Trust Co (保誠投信) in Taipei. "Instead, he rattled China."

On Sunday, Chen said that passing an arms budget and the drafting of a new constitution were among his wishes for 2006.

The TAIEX fell 86.28, or 1.3 percent, to 6,462.06 at its close in Taipei, its biggest slide since Oct. 19.

The measure added 6.7 percent last year. About four stocks fell for every one that gained. January futures declined 1.8 percent to 6,478.

Stocks in companies such as TSMC and Advanced Semiconductor Engineering Inc (日月光), which are planning to invest in China, fell. TSMC, the world's biggest supplier of made-to-order chips, is planning to shift some of its chipmaking equipment to China after Taiwan's government eased regulations. TSMC fell NT$1.50, or 2.4 percent, to NT$61.

The government had banned investment in China by chipmakers on concern jobs would be lost and that China would steal its advanced technology.

The restrictions mean Advanced Semiconductor, the world's largest chip packager, and other Taiwanese rivals such as Siliconware Precision Industries Co (矽品精密), have lost out in China to competitors including US-based Amkor Technology Inc, the world's second-largest chip packager.

Advanced Semiconductor fell NT$1.25, or 4.2 percent, to NT$28.85. Siliconware Precision, Advanced Semiconductor's smaller rival, dropped NT$2.65, or 5.8 percent, to NT$43.40.

Companies such as China Steel and Far Eastern Textile Ltd (遠東紡織), which count China among their key export markets, also declined.

China Steel, the nation's largest steelmaker, dropped NT$0.55, or 2.2 percent, to NT$24.45. Far Eastern Textile, the nation's largest textile maker, declined NT$0.90, or 4.1 percent, to NT$21.15.

Tourism-related and transportation stocks also fell.

An index tracking six tourism-related companies fell 6.6 percent, the biggest drop today among 19 industry groups that make up the TAIEX. The transport index was the second-biggest decliner, down 5.4 percent.

Formosa International Hotels Corp (晶華), the nation's biggest hotel operator by market value, plummeted NT$4 to NT$61.50.