Mon, Jun 29, 2009 - Page 12 News List

Stimulus losing punch: analysts

HO-HUM: Few things come as a surprise to investors these days, analysts said, leading to subtle market responses to talk of recovery or warming ties with China

By Crystal Hsu  /  STAFF REPORTER

The local equity and currency markets appear to have grown immune to extra capital and expectations of better ties with China after rallying for months amid poor economic fundamentals, analysts said recently.

The benchmark TAIEX gained 1,872 points, or 40.78 percent, this year while the New Taiwan dollar edged up NT$0.151, or 0.45 percent against the US currency, despite a record contraction of 10.24 percent in the first quarter, government statistics showed.

The stock index shed 426.88 points with turnover halving to NT$100 billion (US$3.03 billion) this month, after approaching the 7,000-point mark prior to the Dragon Boat Festival late last month on concern of overvalue.

Eric Lai (賴建承), an analyst at Marbo Securities Consultant Co (萬寶證券投顧), said that talks of recovery or warming ties with China could no longer galvanize the local bourse, which has entered a ­horizontal-correction phase in the absence of fresh stimulus.

“A leading indicator, the market operates on expectations,” Lai said on Thursday. “Few things, if any, come as a surprise these days.”

This phenomenon helped explain why the TAIEX rose 1.77 percent last Monday even as the ­Directorate-General of Budget, Accounting and Statistics said the unemployment rate hit a new high of 5.82 percent last month and is set to climb higher, Lai said.

Likewise, the stock barometer lifted a bare 0.09 percent the next day after the central bank decided last Thursday to keep the interest rates at their current low level.

“The development was ­consistent with the market expectation and so were revisions of GDP growth forecasts by domestic economic institutes,” Lai said.

Academia Sinica and Polaris Research Institute (寶華綜合經濟研究院) revised their estimate for the economy to a decline of 3.46 percent and 4.6 percent for this year respectively with an emphasis that the worst of the downturn is over.

Council for Economic Planning and Development Chairman Chen Tain-jy (陳添枝) said on Friday the economy was on a slow and protracted road to recovery, whatever shape it may take. Despite his share of uncertainty, Chen dismissed worry about a W-shape recovery — featured with double spells of slump — but admitted the recovery is too weak to resemble a V.

“However, all the data show the recovery is under way despite the snail’s pace,” Chen told local media after his agency released a report on the index of leading indicators, which picked up for the fourth straight month last month.

Johnny Chen (陳擎宏), deputy manager of the economics and industry research department at First Commercial Bank (第一銀行), said the recovery hinges on a revival of foreign demand in the second half of the year.

“Hopefully, the world economy is strong enough then to avoid a repeat of last year when the high season [for export orders] turned out to be shockingly cold,” he said.

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