Tue, Aug 22, 2006 - Page 12 News List

TAIEX dives on political instabilities

NEGATIVE NEWS Worries over a campaign to oust the president, as well as the West's stand-off with Iran, caused the market to fall 3.2 percent yesterday

By Jackie Lin  /  STAFF REPORTER

Shares tumbled on the local bourse yesterday on reports that protesters calling for President Chen Shui-bian (陳水扁) to resign might start their demonstrations ahead of time, analysts said.

Iran is expected to deliver its response to the West's compromise nuclear package today, and China's interest rate hike last Friday also contributed to the share fall, they added.

The benchmark TAIEX plunged 215.16, or 3.2 percent, to 6505.92 points yesterday, its biggest decline since June 20, according to the Taiwan Stock Exchange.

Turnover was NT$88.09 billion (US$2.7 billion).

Market value shrank NT$522.9 billion, from NT$16.45 trillion last Friday to NT$15.93 trillion yesterday.

Foreign investors bought a net NT$1.88 billion, while securities investment trust companies sold a net NT$1 billion and dealers sold a net NT$2.55 billion.

"Political instability usually dents investor confidence, triggering selling pressure," said Huang Shin-hui (黃熏輝), an analyst at Capital Securities Corp (群益證券), in a phone interview.

The anti-Chen campaign led by former Democratic Progressive Party (DPP) chairman Shih Ming-teh (施明德) is heating up, with a sit-in scheduled as early as Aug. 27, according to campaign spokeswoman Ho De-fen (賀德芬).

"Although Taiwan's political situation has been fluctuating over the past two years, major impacts will only be seen on the stock market when intense protests are held," Huang said.

Hon Hai Precision Industry Co (鴻海精密), Taiwan's biggest electronics exporter, slumped NT$8.5, or 4.5 percent, to NT$179. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's largest made-to-order chipmaker, lost NT$1.7, or 2.9 percent, to NT$57.9.

Formosa International Hotels Corp (晶華酒店), which operates the Grand Formosa Regent Taipei and plans to invest in China, bucked the trend to close limit-up at NT$98.9.

"Due to insufficient domestic demand, Taiwan needs the injection of foreign capital to activate the market," said Andrew Tsai (蔡明彥), vice president of the research department of Taiwan International Securities Corp (金鼎證券), adding that a relaxation in Taiwan-China trade and tourism had been seen a stimulus for buying local shares.

He suggested that investors were having second thoughts about dumping money into the stock market now, as chances for profitability are slim.

Tsai expressed a conservative view toward the stock market's performance during the second half of the year.

The TAIEX could fall to as low as 5,800 points, creating an opportunity for long-term investors to bottom-fish, Tsai said.

He estimated that an upswing would only come in the fourth quarter, the traditional peak season for the electronics sector, when the index might approach 7,000, compared with 7,474 on May 8, the highest point so far this year.

Huang at Capital Securities expressed a similar view.

He suggested that investors stay away from small and medium-sized electronics stocks this week due to heavy selling pressure.

For the medium and long term, stocks with high yields are favorable picks, such as E.Sun Financial Holding Co (玉山金控), Formosa Petrochemical Corp (台塑石化) and China Steel Corp (中鋼), Huang said.

Investors could also look for an opportunity to buy China concept stocks, including Uni-President Enterprises Corp (統一企業), the nation's largest food conglomerate, he said.

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