NUC change not likely to rock TAIEX

President Chen Shui-bian's (陳水扁) announcement yesterday that the National Unification Council will "cease functioning" will likely have a limited impact on the local bourse, market watchers said yesterday.

"I am neutral about the decision ? and do not anticipate a huge impact on the market in the future," Jesse Wang (王嘉樞), head of research at BNP Paribas Securities (Taiwan) Co Ltd, said in a telephone interview yesterday.

Softer language

The announcement's influence was diminished as Chen backtracked from saying he was "abolishing" the unification body and the guidelines, Wang said.

Also, China may not react aggressively -- as it did in 1995 and 1996 with missile threats in response to then president Lee Teng-hui's (李登輝) visit to the US -- because a strong reaction could strengthen domestic solidarity and independence sentiment against China, which is the last outcome Beijing wants, Wang said.

BNP Paribas has retained its "overweight" rating on the nation's stock market, which it made last month. The French brokerage said it would not revise its prediction that the benchmark index will peak at 7,800 points this year.

The TAIEX advanced 23.41 points, or 0.36 percent, to close at 6,561.63 yesterday on turnover of NT$79.34 billion (US$2.44 billion), with the market widely expecting Chen to adopt softer language in announcing the scrapping of the council after communications with the US.

After chairing a National Security Council meeting yesterday afternoon, Chen said the council and guidelines would cease to operate and that no changes had been made to the status quo.

Chen said in a speech a month ago that he was considering abolishing the council, which has barely functioned in recent years, sparking concern from the US and warnings from China against any moves toward independence.

Market Resilience

Meanwhile, another analyst said he did not expect the announcement to a significantly impact the local bourse.

The stock market is becoming calmer and less sensitive to political risks than before, said Dave Chou (周顯黎), an analyst at Yuanta Core Pacific Capital Management (元大京華投顧).

Also, the influence of the month-long political controversy had already been reflected in several declines in the benchmark index last week, Chou said.

The market should continue to consolidate until the end of the current quarter, with the TAIEX fluctuating between 6,400 and 6,700 points, he predicted.

Investment picks include high-tech stocks like Taiwan Semiconductor Manufacturing Co (台積電) and United Microelectronics Corp (聯電), which are more resistent to downward pressure, he added.