Shares closed up 0.39 percent on bargain hunting yesterday, after the benchmark TAIEX fell below the psychologically important 7,000 points in the morning session, dealers said.
The index managed to recover later in the day after Vice Premier Paul Chiu (邱正雄) reassured investors with talks of a positive long-term outlook, following a weekly Cabinet meeting yesterday.
The index ended 27.4 points higher at 7,075.65, ending a two-day decline. Turnover was NT$94.74 billion (US$3.12 billion).
Mars Hsu of Grand Cathay Securities Corp (大華證券) said the market remained weak as jittery investors were susceptible to bad news.
“Investors have lost confidence after the dramatic fall. Therefore, investors dumped shares on trivial negative news,” he said.
The index has plunged about 2,300 points since President Ma Ying-jeou’s (馬英九) inauguration on May 20.
Credit Suisse recommended caution on technology shares because of a rapidly deteriorating economic environment.
“As initial [third quarter] guidance from select companies suggests, revenue expectations are under threat. Coupled with sticky [or rising] costs and a low margin, the impact on profitability is significant,” it said.
CONFIDENCE
Chiu said that among Asian countries, foreign investors favored the Taiwanese market, but that they would have more confidence in Taiwan’s prospects if it continued to “move forward” and relaxed investment restrictions.
The vice premier said that the medium and long-term outlook of the domestic stock market was positive, adding that the yield on local shares was expected to reach 4.67 percent this year, better than the interest rates of time deposits offered by domestic banks.
Foreign institutional investors net sold NT$761 million in local shares yesterday, stock exchange data showed. This month so far, foreign investors have offloaded NT$61.2 billion in local shares, the data showed.
“In an open country, capital flow is inevitable,” Chiu said.
He said the government would place great importance on the rise and fall of the TAIEX, adding that the government had encouraged the four national funds to invest in stocks with sound medium and long-term prospects.
But the government would not encourage the National Stabilization Fund (國安基金) to invest in the stock market for the time being unless “non-economic factors” or a great amount of capital retreat came into play, he said.
“We strictly abide by the rules,” he said.
COMMUNICATION
Chiu said foreign investors had advised the government to explain its policy more clearly to the public, which could make investors more willing to make medium and long-term stock investment.
Meanwhile, Cabinet Spokeswoman Vanessa Shih (史亞平) said Premier Liu Chao-shiuan (劉兆玄) had told the Cabinet during the meeting that the government would insist on opening up Taiwan while lifting more investment restrictions.
“When we review Taiwanese history, [we see that] open policy brought about prosperity while closed-door policies led to decline. With the public’s expectations in mind, the new administration should have the courage to leave the ‘vicious circle’ behind,” Shih quoted the premier as saying.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
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