The local stock market is likely to remain lukewarm today as the market digests mixed information about the continuation of quantitative easing policy and the slower than expected economic growth in the US, Masterlink Securities Investment Advisory Corp (元富投顧) president Liu Kun-hsi (劉坤錫) said yesterday.
“Although the US market reacted positively toward the [US] Federal Reserve’s move to maintain its quantitative easing policy last Wednesday, the sentiment faded on Thursday as the market reflected upon the reason behind the announcement, which is the slower than expected economic growth in the US,” Liu said by telephone.
The TAIEX declined 0.49 percent to 8,209.18 points and the GRETAI index rose 0.62 percent to 121.7 points on Wednesday, before the Mid-Autumn Festival
holiday. The markets resume trading today.
The Fed on Wednesday trimmed down its quarterly economic forecasts for the US this year and next year to between 2 percent and 2.3 percent and between 2.9 percent and 3.1 percent respectively, from 2.3 percent to 2.6 percent and 3 percent to 3.5 percent it previously estimated in June.
The unresolved political dispute between President Ma Ying-jeou (馬英九) and Legislative Speaker Wang Jin-pyng (王金平) would also prevent investors from pouring more money into the stock market, Liu said.
“Local investors are now taking a wait-and-see approach to the unfolding dispute, worrying that the cross-strait service trade agreement and the budget plan for next year might be jeopardized,” Liu said, adding the trade agreement plays a significant role for local online shopping companies and financial institutes seeking expansion in China.
As for foreign investors, who consider the political chaos as a short-term incident, Liu said he expects them to remain positive toward the local stock market, but with less optimism as global economic growth shows signs of slowing down.
Meanwhile, the government is expected to initiate new rules today to allow short sales of about 1,200 shares on the main board and on the over-the-counter (OTC) market, even if they fall below their previous closing levels.
The initiative is a supplementary measure and will not significantly influence the market today, Liu said.
The GRETAI Securities Market, which operates the local OTC market, said the new short sale rules are expected to broaden investment targets for investors, while investors who tend to conduct hedge and arbitrary trading will be able to make good use of the new trading mechanism.
Currently, investors are allowed to short only 150 stocks in the local bourse in a session, even if they fall below their closing prices in the previous day, according to the Financial Supervisory Commission.
The new rules will not allow investors to short the stocks that fall 7 percent, the maximum daily decline, in the previous session. Short sales for those stocks will resume in the next trading session.