TAIEX slumps after US releases weak job data

Taiwan's stocks dropped the most in almost five months, paced by Hon Hai Precision Industry Co (鴻海精密), after job creation slowed in the US, raising concern the world's biggest economy is headed for a recession.

"Weakening US demand will be reflected in Taiwan's export figures," said Murphy Huang (黃耀德), who helps manage US$2.3 billion at PCA Securities Investment Trust Co (保誠投信) in Taipei. "Investors should avoid exporters."

Catcher Technology Co (可成科技), Taiwan's largest maker of metal casings for computers and mobile phones, fell after brokerages including Merrill Lynch & Co cut the stock's rating.

The Taiex index slumped 337.73, or 4.1 percent, to close at 7,883.37 in Taipei, its biggest decline since Aug. 16. About 19 stocks dropped for every one that gained. January futures fell 4.6 percent.

Hon Hai, Taiwan's biggest electronics exporter, dropped NT$11.50, or 6.3 percent, to NT$171.50. Taiwan Semiconductor Manufacturing Co (台積電), the world's biggest supplier of made-to-order chips, slipped NT$4.20, or 7 percent, to NT$55.80. Taiwan Semiconductor makes about three quarters of its sales to US buyers. Acer Inc, the biggest Taiwanese maker of personal computers, lost NT$4.20, or 7 percent, to NT$56.

US payrolls rose by 18,000 last month, the fewest new jobs since 2003, after economists had forecast a rise of 70,000. The unemployment rate jumped to a two-year high of 5 percent, compared with an estimate of 4.8 percent. The US is Taiwan's biggest export market after China.

Harvard University economist Martin Feldstein, head of the group that dates economic cycles in the US, said on Saturday the odds of a recession are more than 50 percent as a result of the jobs report.

Catcher dropped NT$11, or 6.8 percent, to NT$150.50, its lowest in almost two years. Investors should sell Catcher shares because its revenue of NT$1.2 billion (US$37 million) last month was less than the market's expectations of NT$1.7 billion, Tony Tseng (曾省吾), a Taipei-based analyst at Merrill Lynch (美林證券), wrote in a report on Sunday.

Tseng downgraded shares of Catcher, which reported December sales on Friday, from "buy," citing disappointing sales growth. He cut his 2007 earnings estimates for Catcher by 6 percent to NT$6.98 billion, and for 2008 by 32 percent to NT$6.78 billion.

Credit Suisse Group cut its recommendation for the stock to "underperform" from "neutral," and reduced its 12-month price target to NT$160 from NT$262. Credit Suisse analyst Pauline Chen cited falling gross margins, rising labor costs, slower growth in Catcher's main business of magnesium casings and the low December sales as reasons for the downgrade.

Asustek Computer Inc (華碩電腦), the world's largest manufacturer of motherboards that connect computer components, dropped NT$6.60, or 6.9 percent, to NT$89.60.

The US International Trade Commission said it will investigate claims by International Business Machines Corp that the Taiwan-based computer maker violated three patents for computers, motherboards and graphics cards.