Local shares slid 0.8 percent as investors turned cautious yesterday in the wake of accusations of irregularities involving two construction firms, analysts said.
The TAIEX, which gained more than 3,000 points since November and touched 7,084 points during trading on Monday, has come under pressure for a correction, said Winson Wang (王榮旭), an analyst at Marbo Securities Consultant Co (萬寶證券投顧).
The benchmark index fell 55.94 points to 6,893.14 after fluctuating between 6,847.76 and 6,931.29, Taiwan Stock Exchange Inc (TWSE) statistics show.
Transactions amounted to NT$156.2 billion (US$4.8 billion) with foreign funds buying a net NT$8.11 billion, TWSE data showed.
ADJUSTMENTS
“It is not uncommon for investors to adjust their portfolio after unfavorable reports about listed companies come to light,” Wang said by telephone.
“The correction for the two construction firms in particular may persist for a while,” he said.
The probe into China Metal Products Group (勤美建設) and Prince Housing and Development Corp (太子建設) over insider trading, breach of trust and forgery triggered panic selling of their stocks, which closed down by their daily limit to NT$37.5 and NT$17.5 respectively.
The construction sub-index dropped 5.7 percent and dragged down asset issues by 3.7 percent, TWSE tallies showed.
The stock exchange said it would not take action against the two firms before the investigation is finished.
Analysts said the investigation has had a limited impact on the local bourse, which will resume its bullish performance after the adjustment ends.
“The stock market will continue to benefit from excess capital at home and abroad,” Wang said.
He predicted the index would move above the 7,000-point level later this month.
OPTIMISM
Mike Chow (周道中), a senior manager at Yuanta Core Pacific Capital Management (元大京華投顧), was also optimistic. He thinks the TAIEX will pick up in a day or two now that the global slump has stabilized.
“It is unlikely the stock market would take a dive when economic data in the US and elsewhere have shown improvement,” Chow said by telephone.
He dismissed links between the probe and the dip in the TAIEX, saying profit-taking accounted for the adjustment.
Idle funds would continue to dominate the equity market in the short run, he said.
But Ta Chong Bank (大眾銀行) chairman Chen Chien-ping (陳建平) said market momentum may not be strong enough to sustain the liquidity-driven rally.
The local capital market had recently seen full participation by retail investors instead of institutional investors, which may trigger fluctuations this quarter, Chen said.
ADDITIONAL REPORTING BY JOYCE HUANG
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