The TAIEX plummeted 211.43 points, or 2.98 percent, to 6,894.66 yesterday, as panic selling pushed the index to its lowest level in six-and-a-half months after the US announced that unemployment rose last month and the legislature remained mired in the capital gains tax dispute, analysts said.
The slump made the local bourse the worst performer among its major Asian peers, followed by South Korea with a 2.8 percent drop, China with a 2.73 percent decline and Hong Kong with a 2.01 percent drop.
Losses swept across all sectors with shares in more than 200 companies falling by their daily 7 percent limit, Taiwan Stock Exchange data showed. Turnover amounted to NT$77.21 billion (US$2.57 billion).
“While the increase in US unemployment weakened sentiment across Asia, the capital gains tax plan cannot avoid blame,” said Winson Wang (王榮旭), an analyst at Marbo Securities Consultant Co (萬寶證券投顧).
Uncertainty worries investors the most and many considered it safer to flee the market for fear of a prolonged drama, Wang said, after Chinese Nationalist Party (KMT) lawmakers unveiled their own revisions to the capital gains tax proposal and pressed ahead with the legislative process.
The benchmark index has dropped to its lowest level since Dec. 20 last year, when the government announced plans to activate the National Stabilization Fund to shore up the local bourse after the death of former North Korean leader Kim Jong-il.
Foreign investors sold a net NT$2.695 billion of shares, while proprietary traders and mutual funds cut holdings by a net NT$419.25 million and 279.81 million respectively, exchange statistics showed.
Foreign funds have trimmed positions for 12 consecutive sessions, suggesting a bearish view on the local market, said James Yeh (葉鴻儒), an analyst at JPMorgan Asset Management Taiwan.
The TAIEX may test the 10-year moving average of 6,836 points this week if global bourses fail to show signs of stabilization overnight, Yeh said.
Major technology firms led the tumble, with smartphone maker HTC Corp (宏達電) shedding 5.8 percent to NT$390 and Chimei Innolux Corp (奇美電子), the nation’s top LCD panel maker, closing down by the daily limit at NT$11.35, stock exchange tallies showed.
TPK Holding Co Ltd (宸鴻), one of Apple Inc’s touch module suppliers, fell 6.76 percent to NT$386 and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s top contract chipmaker, slid 4.26 percent to NT$76.5, exchange figures showed.
Acer Inc (宏碁) chairman J.T. Wang (王振堂) raised concerns over the capital gains tax, saying the government should better prioritize its policy goals amid the global economic slowdown.
“It’s not appropriate to impose capital gains taxes in Taiwan because the people who would be most affected by the tax are already weathering the crisis caused by the European debt crisis,” Wang told reporters on the sidelines of the annual Computex trade show.
Wang’s comments came after TSMC chairman Morris Chang (張忠謀) said last week he opposed the tax plan because it would also raise the alternative minimum tax on his company from 10 percent to 12 percent, increasing its tax burden by NT$3 billion next year.
Additional reporting by George Liao