Shares flat amid political uncertainty

Local stocks were basically unchanged yesterday despite the announcement of a new premier.

Analysts said that political uncertainty, coupled with a lack of policy initiatives and possible capital outflows, could continue to constrain the performance of the nation's equity markets this week.

Shares opened in positive territory yesterday, spurred by robust international markets, but could not sustain the momentum amid modest trading.

The benchmark TAIEX closed down 0.98 points, or 0.01 percent, at 8,030.56 on turnover of NT$80.6 billion (US$2.42 billion).

By comparison, regional markets advanced, led by Hong Kong, after the Chinese government announced last week it would allow banks to invest in markets outside of the country, which opens up approximately US$7 billion in funds which can be invested overseas.

"Weak momentum and a lack of investor confidence led to an underperforming local bourse," said Jason Huang (黃崇恩), an assistant manager at UOB Investment Advisor (Taiwan) Ltd.

Foreign investors could pull money from Taiwan, because of a weakening local currency, and attempt to cash in on the bullishness in neighboring markets such as Hong Kong and Singapore, Huang said.

Foreign institutional investors bought a net NT$1.29 billion in shares yesterday, compared with a net sale of NT$170 million in shares by domestic institutional investors, the Taiwan Stock Exchange's data showed.

Tourism and transportation stocks were the worst performers with the sub-indices dropping by 0.99 percent and 0.75 percent, respectively, on a lack of cross-strait policy relaxation.

Concern over the possible political fallout of President Chen Shui-bian's (陳水扁) inauguration anniversary speech on Sunday, combined with the pessimistic outlook for the relaxation of economic ties with China is expected to overshadow the local bourse, MasterLink Securities Investment Advisory Corp (元富投顧) said in a report yesterday.

The securities company expected the benchmark index to consolidate below 8,100 points,

Investors appeared lukewarm about the appointment of Straits Exchange Foundation Chairman Chang Chun-hsiung (張俊雄) as the new premie -- the sixth during Chen's seven-year administration.

"We do not expect the new Cabinet to carry out anything substantial. It is a caretaker government only," Huang said.

Both UOB Investment and Mega International Investment Services (兆豐國際投顧) recommended high-tech stocks as short-term investment targets, including flat panel makers, such as AU Optronics Corp (友達光電) and Chi Mei Optoelectronics Corp (奇美電子), and handset components suppliers such as Merry Electronics Co (美律實業).

In response to the political reshuffle, the business community yesterday voiced their hope for policy continuity and further loosening of cross-strait restrictions after Chang assumes office.

Chang Ping-chao (張平沼), chairman of the General Chamber of Commerce (全國商業總會), told the Central News Agency that he hoped the new premier would expedite the implementation of chartered flights across the Taiwan Strait as well as opening up to Chinese tourism.

Preston Chen (陳武雄), who chairs the Chinese National Federation of Industries (CNFI, 全國工業總會), meanwhile, said that it would continue to lobby the new premier for a 5 percent cap on the planned rise in the minimum monthly wage.