The Cabinet’s stimulus measures unveiled yesterday morning failed to buoy the local bourse, as investors stayed on the sidelines ahead of the planned revision of the capital gains tax, analysts said.
The TAIEX closed down 0.21 percent at 8,263.05, with turnover remaining light at NT$63.87 billion (US$2.13 billion), Taiwan Stock Exchange data showed.
“The local bourse has grown numb to stimulus measures, which may prove limited in driving the nation’s export-oriented economy while external demand is softening,” David Chu (儲祥生), chairman of state-run Hua Nan Securities Management Investment Co (華南投顧), said by telephone.
The government has introduced a spate of stimulus packages since the global financial crisis in 2008, but nothing short of a concrete improvement in the global economy can put an end to Taiwan’s sluggish recovery, Chu said.
Except for the proposal to raise the capital gains tax threshold, the 12 other stimulus measures have no immediate or direct impact on the equity market, he said.
Yesterday’s turnover on the local bourse was better than the NT$59.5 billion recorded a day earlier, but still far below the NT$100 billion level which analysts see as healthy and it will stay below that level unless the legislature can accelerate the approval of a bill to revise the capital gains tax, Chu said.
However, uncertainties exist over whether the legislature can complete the capital gains tax revision during the current session, which ends on May 31.
The TAIEX may rally a bit once the legislature axes the 8,500-point taxable trigger, freeing small investors from paying an extra 0.1 percent levy on their stock sales whether they gain or lose, Chu said.
In the end, it is earnings results that set the share values of listed companies and guide investors’ decisions, he said.
Winson Wang (王榮旭), a stock analyst at Marbo Securities Consultant Co (萬寶證券投顧), expressed similar views, saying the benchmark index is likely to consolidate amid modest trading for the rest of this month.
“It is not uncommon for lawmakers to stage surprises, and investors would rather wait and see the proposed tax revision,” Wang said by telephone.
In addition, most companies usually report lackluster earnings in the current quarter — the low season for electronics makers — which would also weigh on local shares and transactions, Wang said.
The situation would improve next quarter if buyers abroad place more orders than expected in anticipation of strong sales over the Thanksgiving and Christmas season, Wang said.
The nation’s major trading partners have sent mixed messages so far, he said, as the US appears on track for a recovery, but China has fared weaker than expected.
The TAIEX is likely to fluctuate in a range between 8,500 and 8,000 until uncertainty over the tax revision clears up, said Sophie Chang (張淑惠), a fund manager at Prudential Financial Securities Investment Trust.
Cautious sentiment accounts for the slowdown in the purchase of local shares by foreign institutional investors, Chang said.