The TAIEX shed 77.92 points, or 1.09 percent, to close at 7,103.62 yesterday as unease over the credit ratings downgrade of nine European nations outweighed expectations of post-election rallies after President Ma Ying-jeou (馬英九) secured his second term on Saturday, analysts said.
The cautious sentiment is set to increase today and tomorrow, when the local bourse is due to close for the Lunar New Year holidays, driving investors to trim holdings to avoid a liquidity trap, they said.
“The end of the presidential election helped clear [domestic] political uncertainty, allowing the market to refocus on financial issues,” Jordan Chen (陳朝燈), chief investment officer at Schroder Investment Management Taiwan, told a media briefing.
The TAIEX’s tumble was in line with poor showings across Asian bourses as worries over the European debt crisis intensified after Standard & Poor’s (S&P) on Friday cut sovereign credit ratings for nine European states, Chen said.
In particular, S&P deprived France and Austria of their “AAA” standing, lowered credit ratings for Italy, Spain and Portugal by two notches and put 14 states in the bloc on its negative credit watch.
Concerns over European debt problems will extend into this year after seeing the TAIEX plunge by 21 percent last year, Chen said.
Clearly, the financial sector yesterday was under heavy pressure because of escalating European debt problems, with Mega Financial Holding Co (兆豐金控) falling 4.4 percent to close at NT$19.55 and Chinatrust Financial Holding Co (中信金控) shedding 4.2 percent to end at NT$18.25.
Turnover was NT$74.6 billion (US$2.54 billion) on the main bourse, down from NT$97.84 billion on Friday, Taiwan Stock Exchange data indicated.
The benchmark index is likely to fluctuate within a tight range in the next two sessions, with more investors expected to stay on the sidelines until the market reopens on Jan. 30, Chen said.
Foreign institutional players slashed a net NT$5.68 billion in local shares, while mutual funds and proprietary dealers cut net holdings by NT$2.49 billion and NT$1.53 billion respectively, according to stock exchange statistics. Technology firms bore the brunt of the fall, with shares in Taiwan Semiconductor Manufacturing Co (台積電) falling 2.84 percent to close at NT$75.3 and rival United Microelectronics Corp (聯電) ending 4.2 percent lower at NT$13.45, after investors took cues from a tumble of their counterparts on Wall Street at the end of last week, dealers said.
Hon Hai Precision Industry Co (鴻海精密) was down 2 percent to NT$83.5, while Advanced Semiconductor Engineering Inc (日月光半導體) shed 2.85 percent to NT$27.25, stock exchange data showed.
Shares in those companies rose significantly after a government stabilization fund stepped in on Dec. 20 to prop up the local bourse, they said.
Schroder Investment takes a neutral view about the TAIEX this year, saying advanced economies will exercise fiscal discipline, suppressing growth for export--oriented economies, including China and Taiwan, Chen said.
Allianz Global Investors Taiwan Ltd (德盛安聯投信) lent support to a conservative approach ahead of the holidays.
Investors can wait until after major US technology firms unveil their fourth-quarter financial results later this month, Allianz fund manager Eric Li (李俊毅) said yesterday.
Lackluster performance will suggest weak restocking demand, boding ill for contract electronic makers in Taiwan, Lee said.