Domestic shares plunged 2.51 percent to hit their lowest level in three-and-a-half months, taking a cue from the 3.6 percent tumble on Wall Street overnight as the European debt crisis escalated worries about a second dip in the global economy.
The nation’s benchmark TAIEX dropped 186.72 points to end at 7,237.71, the lowest since Feb. 8, when the index ended at 7,215. The index ended the week down 534.42 points after closing at 7,772.13 points on May 14.
“The US stock market’s fall triggered a sell-off of local shares,” said Kevin Chung (鐘國忠), a stock market analyst at Jih Sun Securities Investment Consulting Co Ltd (日盛投顧).
The Dow Jones industrial average lost 376 points overnight.
“Investors are turning to defensive stocks for a safe haven. In other words, they are seeking stocks with stable and long-term returns,” Chung said.
Because of their high yields, or strong fundamentals, the world’s No. 2 contract chipmaker United Microelectronics Corp (UMC, 聯電), top telecoms operator Chunghwa Telecom Co (中華電信) and notebook contract maker Wistron Corp (緯創) were overseas fund managers’ favorites yesterday.
Shares of UMC were unchanged at NT$14 yesterday, after the chipmaker said on Thursday that the European debt crisis had yet to severely hurt customer demand.
The share price of Chunghwa Telecom, at NT$61.80, was also flat, while Wistron shares rallied 2.38 percent to NT$51.70.
Overall, foreign investors sold a net NT$10.79 billion (US$335.3 million) in local shares including Shin Kong Financial Holding Co (新光金控) and the world’s No. 2 PC maker Acer Inc (宏碁).
Yuanta Securities analyst Vincent Chen (陳豊丰) yesterday trimmed his forecast for Acer’s notebook computer shipments this year by 13 percent to 35.8 million units, from 41.1 million estimated previously, as demand in Europe and China wanes. Chen maintained a “hold” rating on Acer.
The stock price of Acer dropped 4.13 percent to NT$74.50.
Next week, the TAIEX could range between 6,950 points and 7,450, Chung said. He said that while a weak US stock market could further weaken the local stock market, the Chinese stock market could provide a buffer, citing closer links between Taiwanese and Chinese stock markets.
“The corelation between the local stock market and the Shanghai stock market has been strengthening in recent months, largely because the US is taking a backseat to China,” Chung said.
“And investment sentiment there is stronger than in other stock markets,” Chung said.
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