Sat, Jul 15, 2006 - Page 12 News List

Local shares fall amid oil concerns

By Amber Chung  /  STAFF REPORTER

Shares tumbled on the local bourse yesterday in the wake of overnight losses on US markets amid record high crude oil prices caused largely by geopolitical tension in the Middle East.

The TAIEX shed 139.57 points, or 2.13 percent, to 6,428.03 on turnover of NT$73.58 billion (US$2.25 billion) yesterday, erasing the gains of the past three weeks.

Taiwan Semiconductor Manufacturing Co (台積電) dropped 2.1 percent to NT$55.10 and its closest rival, United Microelectronics Corp (聯電), fell 2.7 percent to NT$18.10. On the main bourse, decliners outnumbered gainers 927 to 89 with 62 stocks unchanged.

Selling pressure came from foreign investors who sold a net NT$18.11 billion yesterday alone, accounting for the bulk of their net sale of NT$25.89 billion this week, according to the Taiwan Stock Exchange's figures.

"The heavy losses in the US markets and elsewhere in Asia coupled with the new high of crude oil prices jointly sent the TAIEX slumping," said Jason Huang (黃崇恩), assistant manager at UOB Investment Advisor (Taiwan) Ltd.

Foreign investors may not regain their confidence any time soon as a result of the poor financial reports that frustrated Wall Street and the upheaval in the Middle East that caused already high energy prices to rocket, Huang said.

The Dow Jones Industrial Average fell by 166.89 points, or 1.52 percent, to 10846.29, while the Standard & Poor's 500 Index declined 16.31 points, or 1.3 percent, to 1242.29 and the NASDAQ Composite Index lost 36.13 points, or 1.7 percent, to 2054.11.

Crude oil for delivery next month gained US$1.70, or 2.2 percent, to a record high US$78.40 a barrel in after-hours electronic trading on the New York Mercantile Exchange as of press time, fueled by Israel's military operations in Lebanon.

The Singaporean investment advisor predicted crude oil prices would rise as high as US$80 per barrel in the near future if the conflict dragged on or escalated with Iran getting involved, Huang said.

This risk coupled with a lack of domestic stimulus due to the low likelihood of the realization of much-anticipated cross-Strait relaxation could continue to overshadow Taiwan's stock market, he said.

The analyst suggested investors remain conservative, as he expected further downturns with the TAIEX dropping as low as 6,100 in coming weeks. Alternatively, they could invest in defensive stocks like financial players or high dividend stocks like China Steel Corp (中鋼).

Mega Securities Corp (兆豐證券), however, appeared more optimistic, saying that it expected the bearishness to end soon as the financial books to be released next week in the US could not be much worse than the already low expectations.

Mega Securities anticipated a recovery in US markets could trigger a rebound on the local bourse as soon as the latter part of next week, Mega Securities' assistant vice president Alex Huang (黃國偉) said.

The market watcher predicted the TAIEX would test the high threshold of 6,800 points soon and suggested that investors take a look at high-tech stocks like notebook makers and their component suppliers and light emitting diode manufacturers.

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