Thu, May 29, 2008 - Page 11 News List

Fuel hikes weigh down transport, industry stocks

MORE HIKE FEARSOne analyst said that the higher prices brought with them the specter of a jump in inflation and other worries over fallout for the economy

AFP AND BLOOMBERG , TAIPEI

Share prices closed 1.28 percent lower yesterday on concerns about the impact of domestic fuel price hikes, dealers said.

They said transport and industrial firms fell sharply on worries that they would face higher operating or production costs.

The weighted index closed down 112.66 points at the day’s low of 8,665.73 on turnover of NT$111.66 billion (US$3.66 billion).

Decliners outnumbered advancers 1,916 to 498, while 270 stocks were unchanged. Five stocks closed limit-up, while 40 were limit-down.

Alex Huang (黃國偉), an assistant vice president at Mega International Investment Services (兆豐國際投顧), said that the fuel price increases that took effect yesterday could lead to further hikes down the road.

“The latest price adjustments do not fully reflect crude oil price surges,” he said. “There are worries about further [hikes] going forward.”

Higher fuel prices raised inflation worries and stoked concerns about the impact on the economy, Huang said, adding inflation and relations with China will continue to dominate the local bourse in the near term.

Meanwhile, ING Securities Investment & Trust Co (安泰證券投信) — which manages the equivalent of about US$13 billion — thinks the TAIEX will gain to 12,000 in a year on improving relations with China and the new government’s economic policies.

“The previous political tension was an obstacle in joining the China growth story,” Steve Chu (鄒鴻圖), Taipei-based head of equities at the company said yesterday in Seoul.

“Tax reform and other economic policies will help boost domestic demand and attract money to Taiwan,” he said.

The TAIEX has added 1.88 percent this year, one of two Asian benchmarks to post a gain.

Chu is increasing his holdings of financials and other stocks related to the domestic economy.

Lower taxes will encourage Taiwan’s investors to invest in Taiwan’s assets rather than overseas, helping boost the economy, he said.

Foreign investors are also buying Taiwanese stocks this year after being net sellers in the previous two years, Chu said.

“The reversal of fund flows has just begun,” he said.

Earlier this month, the government raised its target for this year’s economic growth from 4.8 percent to 5 percent.

Chu said he also expects growth of “around 5 percent” on improving relations with China, and as investment in infrastructure projects help offset the negative impact of inflation.

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