Adjustments in Taiwanese shares might last for some time as the latest food safety scare and renewed concerns over the pace of the global recovery dampen market confidence, analysts said yesterday.
The main trading index yesterday ended down 1.29 percent, or 112.88 points, to close at 8,655.51 with losses cutting across most sectors despite the nation’s improving economic fundamentals, Taiwan Stock Exchange (TWSE) data showed.
“The TAIEX may have peaked last quarter and will need some time to emerge from the bleak sentiment,” Schroder Investment Management Taiwan chief investment officer Jordan Chen (陳朝燈) said.
The local bourse is set to fare weaker in the final quarter than the third, while companies are to see their earnings decline 15 percent due to seasonal factors, Chen said.
The earnings retreat is to take place even though a strong greenback and better-than-expected external demand are favorable for local exporters, especially firms in Apple Inc’s supply chain, the analyst said.
Apple’s new iPhones have proved a blockbuster, but the economic conditions in Europe and Japan are disappointing, and the ongoing food safety scandal is dominating local news, analysts said.
Share prices of food companies yesterday plunged deeper than the broader market, with the sub-index of food stocks falling 1.4 percent to close at NT$1153.18, compared with the benchmark index’s 1.29 percent drop, with shares of certain listed oil manufacturers leading the decline.
Namchow Chemical Industrial Co (南僑化學), the flagship unit of Namchow Group (南僑集團), saw its shares shrink by the daily limit of 7 percent to close at NT$51.9 on the main bourse, following allegations that it used butter fats intended for industrial use to make edible butters.
Stocks of Wei Chuan Foods Corp (味全食品), a major subsidiary of Ting Hsin International Group (頂新集團), closed at NT$25.35, dropping by the daily maximum level for the fifth consecutive trading day after the breakdown of the group’s lard oil scandal.
Two listed oil manufacturers, Formosa Oilseed Processing Co (福懋油脂) and Great Wall Enterprise Co (大成長城企業), also saw their shares plummet by the daily limit of 7 percent, with the same going for poultry producer Charoen Pokphand Enterprise (Taiwan) Co (台灣卜蜂企業).
However, shares of Uni-President Enterprise Co (統一企業) bucked the trend to show a 0.1 percent rise and close at NT$48.05 yesterday, TWSE statistics showed.
Following the government efforts in creating a task force to conduct more extensive reviews of food manufacturers and products, UBS Securities Pte Ltd said the move could lead to negative sentiment for stocks related to the food and beverage sector.
“Any adverse findings would cause unrest or lower consumer confidence and weaken share price performance of food and beverage manufacturers in the near term,” UBS said.
With fears setting in, the correction for the benchmark TAIEX is likely to continue for one to two months based on past experiences, UBS Taiwan equities and research head William Dong (董成康) said.
The brokerage has trimmed its forecast for the year-end index target to 9,000 from 9,250, citing the increased uncertainty ahead.
“We believe the TAIEX will remain volatile over the next few weeks with a downward bias,” Dong said.
The local bourse has shed 8.27 percent for the last one-and-a-half months, according to TWSE statistics.
The Financial Supervisory Commission has announced plans to allow investors more leveraging flexibility in the hope of boosting local stock market turnover to NT$115 billion a day, from an average of NT$80 billion last month, but to no avail.
The trading volume was NT$101.69 billion yesterday.
Investors would prefer to stay on the sidelines until the food safety storm passes, Chen said.
Still, Schroder and brokers are surprised at the pace of the correction.
Schroder expected the TAIEX to find support at 8600 to 8700 points.
HSBC Securities said it saw the correction as a buying opportunity for companies in the Apple supply chain.
An Shin Food Services Co (安心食品) chairman Theodore Huang (黃茂雄) yesterday said the government and the nation’s food industry have to focus more on food traceability management.
“Building up consumer confidence is the most important issue now,” Huang said.
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