Fri, Aug 17, 2007 - Page 12 News List

Credit concerns pummel index anew

MARKET JITTERS Financial stocks bore the brunt of the sell-off amid concerns over domestic banks' exposure to problem loans in the US and fears of a credit squeeze


The stock market tumbled to a more than two-month low as rising concerns over the impact of US subprime loan problems weighed on the market and triggered sell-offs across Asia.

"The US subprime mortgage issue has soured foreign fund managers' appetites for riskier equity markets and caused a meltdown of local investor's confidence," said Andrew Teng (鄧安瀾), an analyst with Taiwan International Securities Corp (金鼎證券).

The benchmark index fell 391.67 points or 4.6 percent to 8,201.37 yesterday -- its lowest level since hitting 8,249.9 on June 1, Taiwan Stock Exchange data showed.

The 391.67-point decline yesterday marked the sixth-biggest single-day drop since 2000. The benchmark TAIEX has lost 737.59 points or 8.2 percent over the past three days, the stock exchange's data showed.

With investors dumping shares, market turnover yesterday rose to NT$180.26 billion (US$5.44 billion), with foreign institutional investors extending their sale of local shares.

"Financial stocks bore the brunt because of growing fears that the US credit squeeze may spread to other markets around the world," Teng said. "As uncertainty remains, I do not expect a sharp V-shaped rebound soon."

The financial index fell 3.97 percent despite a government report last Friday that domestic banks' exposure to US subprime mortgage-related instruments was limited, with losses reaching approximately NT$1.2 billion.

Shares of Cathay Financial Holding Co (國泰金控), the nation's biggest financial service provider, slid 4.6 percent to NT$70.6.

Foreign investors unloaded a net NT$38.45 billion in shares yesterday, with net sales over the past three days totaling NT$64.79 billion, the stock exchange's data showed.

Stocks dumped by foreign investors included Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's biggest contract chipmaker, and Chinatrust Financial Holding Co (中信金控), owner of the nation's largest credit card issuer.

Shares of TSMC fell 3.1 percent to NT$59.1, and those of Chinatrust Financial were down 2.5 percent to NT$21.65.

Trading among local institutional investors was mixed, with investment trust companies purchasing a net NT$1 billion in shares and proprietary traders selling a net NT$2.41 billion.

"Investors sold shares irrationally without considering their fundamentals. They just wanted to get back their money as fast as they could," said Kevin Chung (鐘國忠), a research analyst with Jih Sun Securities Investment Consulting Co (日盛投顧).

The TAIEX fell at a much faster pace than its export rivals, Singapore and Hong Kong. Singapore's Straits Times Index fell 3.7 percent, while Hong Kong's Hang Seng Index dropped 3.3 percent yesterday, Chung said.

"This is an indication that local investors overreacted to the impact of the US housing loan problem," Chung said.

Meanwhile, the NT dollar continued to fall against its US counterpart amid continued foreign capital outflows and increased US dollar demand from importers.

The NT dollar depreciated NT$0.118 to close at US$33.128 against the greenback yesterday -- its weakest closing since July 15.

Turnover surged to US$1.258 billion from US$946 million in the previous day, Taipei Forex Inc's figures showed.

Addressing investor concern over a potential international credit squeeze, central bank Governor Perng Fai-nan (彭淮南) said that the nation's economic fundamentals remained healthy.

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