Fri, Mar 24, 2006 - Page 12 News List

TAIEX drops to new low for the year

CROSS-STRAIT WOES Share prices closed 0.42 percent lower amid overseas and local investors' concern about the government's harder line toward China-bound investment

By Amber Chung  /  STAFF REPORTER

The TAIEX fell yesterday to its lowest level this year, after the government vowed on Wednesday to tighten China-bound investment, market watchers said.

The TAIEX weakened for the fourth straight day by 26.66 points, or 0.42 percent, to close at 6364.60 on turnover of NT$85.32 billion (US$2.62 billion). The benchmark index has dropped by 2.33 percent this week.

Foreign investors sold a net of NT$2.76 billion yesterday and have unloaded NT$16.32 billion worth of shares this week.

"Overseas investors' net sale and profit-taking of high-priced stocks have weighed on the local bourse," Johnny Lin (林英明), head of the research department at Barits International Securities Co (倍利證券), said in a telephone interview yesterday.

High-priced stocks such as mobile phone maker High Tech Computer (宏達電) and Largan Precision Co (大立光電), the nation's leading maker of camera lenses, fell 3.9 percent and 5.2 percent to NT$836 and NT$510, respectively, on the Taiwan Stock Exchange.

The market is expected to experience correction due to slower sales by high-tech companies this month and may not see an improvement until after more clarity on companies' guidance is available by May, Lin said.

The government announced on Wednesday that China-bound investment projects exceeding US$20 million or those involving sensitive technology will be required to go through a stricter approval process starting from June 30.

Investors will also have to sign agreements to allow the inspections to determine whether their China operations are in compliance with Taiwanese regulations.

The new policy could constrain the performance of the local bourse and could become a negative factor in the rating of Taiwan's market by overseas investors, Lin said.

The outlook for the local market appears less thrilling to investors because of the slow sales momentum for electronics products in the upcoming quarters, as well as policy uncertainties.

"The TAIEX will still be weak in the second quarter as a result of slow seasonality for high-tech companies, the mainstream stocks of local bourse," said Michael Lan (藍文彥), a fund manager who oversees a NT$1.6 billion of portfolio at Prudential Financial Securities Investment Trust Enterprises.

Policy uncertainties such as the proposed interest rate cap and the planned personal bankruptcy regulation that are designed to bail out indebted credit and cash cardholders and the worsening bad loans of local banks could keep ailing the market, Lan said.

Analysts expect the TAIEX to hit the bottom at around 6,200 and 6,300 points in the second quarter before it rebounds to a peak of about 7,000 at the end of the third quarter or the start of the final quarter, they said.

Investors can bottom fish for high-tech stocks of decent transparency and cheap valuations, such as the integrated circuit packaging and testing services providers Advanced Semiconductor Engineering Inc (ASE, 日月光) and Siliconware Precision Industries Co (矽品精密), during the slow time, they said.

ASE and Siliconware Precision shares closed down 1.97 percent and 5.87 percent, respectively, yesterday to close at NT$27.3 and NT$38.5

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