The local bourse took a dive yesterday, crippled by rising concerns over US subprime credit woes that brought Wall Street down 387.18 points on Thursday and sent shock waves through world markets.
The benchmark TAIEX opened down 312.33 points before recovering slightly to close the day at 8,931.31, down 251.29 points, or 2.74 percent, from the previous day on the Taiwan Stock Exchange.
Turnover was heavy, reaching NT$166.49 billion (US$5.05 billion).
Based on the stock exchange's data, foreign investors sold a net NT$27.89 billion in shares, domestic proprietary traders sold a net NT$1.19 billion in shares, while domestic securities investment trust companies bought a net NT$880.04 million in shares.
The drop in the local market yesterday followed Wall Street's sharp fluctuation over the past few weeks and was in line with the decline in other regional markets, with Japan posting a 2.7 percent fall, South Korea plummeting by 4.78 percent and Hong Kong shedding 2.85 percent.
Mike Chow (
"The volatility may continue through the next two weeks or until the Moon Festival at the end of September in our worst-case scenario," Chow said.
The government may intervene to support the market, but foreign investors are likely to cut their holdings in heavyweight stocks given rising fears that the US' subprime home loan problem, which has dented the banking sector, will affect the US economy next year, he said.
Trading may also be affected by the high value of stock purchases on margin, which has surged to about NT$950 billion, Chow said.
US President George W. Bush has tried to allay public fears by saying that the subprime mortgage sector was under control and the fundamentals of the US economy remained strong.
Taiwanese shares, backed by strong fundamentals, have a good chance to rebound should concerns over subprime mortgages ease, Chow said.
Many companies have reported good second-quarter results, including manufacturers of motherboards, notebook computers and global positioning systems (GPS) as an increasing number of consumers are hurrying to replace their old computers, he said.
Shares of Compal Electronics Inc (
Companies that make sports-related equipment will benefit as the 2008 Beijing Olympics draws nears, Chow said.
The government is also likely to offer incentives that could stimulate the market in the runup to the presidential election next year, he said.