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 (
High-priced stocks such as mobile phone maker High Tech Computer (
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 (
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