Fri, May 04, 2007 - Page 12 News List

Investors turn conservative

PLAYING IT SAFE With the DPP and KMT gearing up for the presidential election, investors' confidence in stock performance has weakened, a new poll showed

By Jackie Lin  /  STAFF REPORTER , WITH BLOOMBERG

Stock investor sentiment last month turned from optimistic to conservative, reversing the upward trend of the past six months, a survey released yesterday said.

The survey, published by Shih Hsin University and the Chinese-language weekly Business Today in the latter's bimonthly report, attributed the shift in sentiment to rising consumer prices and political infighting ahead of next year's presidential election.

The sentiment index slid to 12.6 percentage points from 14.4 in February, the survey found. It nosedived to minus 92.8 in August last year before a strong rebound to minus 12.3 in October, the data showed.

But with the two major political parties gearing up for the presidential election, political tensions have heightened, weakening investors' confidence in stock performances for the next two months, said Kuo Nai-fong (郭迺鋒), associate professor and chair of the finance department at Shih Hsin University.

Twenty-three percent of survey respondents expected bickering between the Democratic Progressive Party (DPP) and the Chinese Nationalist Party (KMT) to be the leading cause of swings in the stock market in the near term; 22 percent cited relations with China; 20 percent cited swings in international stock markets and 11 percent cited movements of foreign capital and other factors.

The survey polled 1,073 investors between April 23 and Sunday, with a margin of error of plus or minus 3 percentage points.

The TAIEX yesterday closed up 0.3 percent at 7,926.66 on Wall Street's overnight gains. Turnover was NT$119.98 billion (US$3.6 billion), with foreign institutional investors buying a net NT$13.02 billion in shares and domestic investors selling a net NT$1.54 billion in shares, the Taiwan Stock Exchange's tallies showed.

The benchmark TAIEX index has risen by 1.3 percent so far this year, while the Morgan Stanley Capital International Asia-Pacific Index has gained 4.4 percent over the same period of time.

Merrill Lynch said Taiwan's stocks are trailing a regional rally and may lag further behind on concerns that the DPP will win the presidential election.

Sophia Cheng (程淑芬), Merrill's Taiwan research chief, predicted the DPP would win over the KMT by "a tiny margin'' in the election.

"The market will soon be talking about what will happen if the KMT doesn't win. That's a reason why the market is lagging,'' she said in an interview.

Former KMT chairman Ma Ying-jeou (馬英九), who is on trial for allegedly embezzling NT$11.2 million (US$336,000) from his mayoral allowance during his terms as Taipei's mayor, was named the KMT's presidential candidate on Wednesday. Opinion polls put him ahead of the DPP's four hopefuls.

Cheng said she had predicted a DPP win in 2004 even though surveys pointed to a KMT victory.

She said the DPP could have an advantage in the election because Ma lacks the support of Legislative Speaker Wang Jin-pyng (王金平).

"We haven't seen Wang's commitment yet and he's important because of his connections," she said.

Cheng also said opinion polls might be biased in favor of the KMT because they failed to adequately survey rural workers, who tend to vote for the DPP.

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