TAIEX plunges on political worries

A woman walks past TV screens showing stock price indexes outside a securities trading house in Taipei yesterday. Share prices closed sharply lower on the TAIEX, falling 3.74 percent amid market weakness across the region. PHOTO: PATRICK LIN, AFP

Share prices closed sharply lower yesterday, falling 3.74 percent amid market weakness across the region following Wall Street's slide last week, dealers said.

They said the market also took a turn for the worse after President Chen Shui-bian (陳水扁) said in a speech on Sunday night that Taiwan should "pursue independence" as well as a new constitution, sparking fresh worries over cross-strait relations.

The TAIEX closed down 285.59 points at 7,344.56, after moving between 7,306.07 and 7,565.95, on turnover of NT$131.66 billion (US$4 billion).

"Taipei suffered a more drastic decline than most of its neighbors because of domestic concerns," said Wilson Lien, a deputy manager at Jih Sun Securities Investment.

Chen's comment -- rhetoric or not -- drove the market below the technical support level of 7,400 points, he said, adding that the index might fall further below 7,200 points in the near term.

"Even such a low level may not hold if Wall Street and other overseas markets fail to stabilize soon enough," Lien said.

Foreign investors continued to sell their domestic holdings for the fourth trading day in a row, disposing of NT$19.26 billion in shares yesterday.

A veteran trader at a US securities house, who asked not to be named, attributed the selloff not to domestic politics, but rising regional risks triggered by a slump in China's equity markets last week.

Foreign investors were expected to continue to reduce their risk portfolios by selling Asian stocks in the near future, the trader said.

The anticipated selloff could drag the TAIEX down to as low as 7,000 points, or down more than 10 percent from the peak earlier this year, he said.

A laggard in the region, Taiwan is likely to stand out and attract a new wave of foreign investment after the current correction cycle ends, the trader said. The US firm's hedge fund clients were expecting a market meltdown in the first half and had marked Taiwan and Japan as favorable targets when they start reinvesting in Asia, he said.

Meanwhile, Mega International Investment Services (兆豐國際投顧) has revised down its short-term forecast for the TAIEX to 7,250 points from 7,600 by the end of the current quarter. In a report released yesterday, it said the market was expected to consolidate until the end of the month.

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