Fri, Feb 20, 2009 - Page 12 News List

Mixed market reaction to DGBAS report

RESIGNATION One analyst said investors appear to have become inured to gloomy economic data and forecasts and are adjusting their capital deployment strategy

By Crystal Hsu And Shih Hsiu-chuan  /  STAFF REPORTERS

Reaction was mixed on the nation’s equity markets yesterday to a new government report that GDP could drop by 2.97 percent this year, as the TAIEX closed slightly higher while the NT dollar continued to weaken.

The TAIEX rallied 30 points to close at 4,528.87, an increase of 0.67 percent, on a buying spree of high-tech shares as investors adjusted their capital deployment strategy, said Alan Tseng (曾炎裕), an analyst at Capital Securities Corp (群益證券).

Turnover amounted to NT$70.51 billion (US$2.033 billion) with trading of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), HTC Corp (宏達電) and MediaTek Inc (聯發科) shares contributing 11 percent.

The showing defied the economic data released on Wednesday by the Directorate General of Budget, Accounting and Statistics that said that GDP could contract 2.97 percent, consumer prices could drop by a record 0.82 percent and per capita income shrink to US$15,957 this year.

Tseng said investors appeared to have become inured to dismal economic data and considered it timely to adjust their portfolios as seen in the heavy transactions of bluechip stocks.

However, the absence of selling pressures at this time should not be mistaken for investors being ignorant of the economic climate, Tseng said by telephone.

“Everyone knows the economy is in a dismal state,” Tseng said. “That explains why the index has hovered around the current level rather than climb higher.”

The weighted index opened lower at 4,475.16, but staged a modest rally after midday and hit a high of 4,571.31 during the session, Taiwan Stock Exchange Co data showed.

The electronic and machinery sub-index posted the biggest hike, 1.4 percent, followed by paper and cement, which gained 0.7 percent and food product issues, which rose 0.6 percent.

Tseng said the upward adjustment would last until the middle of next month when investors are likely to dump high-tech stocks before listed companies release their first-quarter financial statements in early April.

By contrast, the New Taiwan dollar shed 0.72 percent, or NT$0.025, falling for the 11th straight day, to close at NT$34.675 against the greenback on expectations the government would favor a weak NT dollar to boost exports, dealers said.

Turnover was US$730 million on Taipei Foreign Exchange Inc. Including a trade volume of US$566 million on the smaller Cosmos Foreign Exchange Inc, total transactions amounted to US$1.296 billion, data from the two foreign exchange companies showed.

A dealer at a local bank said the market appeared relatively calm in light of the DGBAS outlook.

The dealer said the NT dollar would depreciate further to reflect the poor economic fundamentals.

“I would not be surprised if the NT dollar drops below the NT$35 level or lower against its US counterpart in the near future,” the trader said by telephone.

Meanwhile, the Cabinet will brief President Ma Ying-jeou (馬英九) this weekend on the economy and measures in response.

The government is pulling all the stops to carry out stimulus measures in the hope of mitigating the pain of the recession, whose severity and magnitude far exceed the estimates of economists at home and abroad.

Minister without Portfolio Chu Yun-peng (朱雲鵬) told reporters after the weekly Cabinet meeting that Premier Liu Chao-shiuan (劉兆玄) had instructed all government officials to strive to implement the stimulus measures since they have no control over global economic developments.

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