Mon, Aug 28, 2006 - Page 12 News List

Political turmoil to turn investors off shares, say dealers


Taiwan share prices are expected to consolidate in light trade this week after last week's steep plunge as lingering political uncertainty keeps investors on the sidelines, dealers said.

They said there were no signs that foreign investors will spend in the local market amid moves by Shih Ming-teh (施明德), a former chairman of the Democratic Progressive Party, to oust President Chen Shui-bian (陳水扁).

However, the bellwether electronic sector may provide support to prevent a further dive in the broader market as the industry has entered peak season.

For the week to Friday, the TAIEX weighted index closed down 194.86 points or 2.90 percent at 6,526.22 after a 2.28 increase a week earlier.

Average daily turnover stood at NT$69.02 billion (US$2.10 billion), compared with NT$89.17 billion dollars a week ago.

The market was expected to move between 6,400 points and 6,600 this week.

"The stock market has been throttled by local political tensions. This week's [last week's] heavy losses have turned the market technically fragile," Capital Securities Corp (群益證券) analyst Huang Hsun-hui said.

"It needs a breather at the moment. Shih's campaign is expected to breed rangebound trade," Huang said.

The push to oust Chen follows alleged corruption scandals involving the president and his family.

Daniel Tseng (曾建銓), an analyst with Fubon Securities Investment Services (富邦投顧), said foreign investors -- the most important buyers in the local market -- were unlikely to re-enter the trading floor soon on political concerns.

"Without meaningful capital injections, the market is expected to trade narrowly, hovering at around 6,500 points next week," Tseng said.

Huang said a silver lining is the improving fundamentals for the electronic sector on rising demand in the second half of the year.

He added the industry is expected to lend some support to the broader market and offset the non-economic impact on the market.

However, Tseng said due to reduced capital inflows, small cap electronic stocks, such as integrated circuit designers and video-game console makers, may have a better chance of attracting market attention.

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