Mon, Dec 01, 2014 - Page 13 News List

Poll results could affect stock market

WORD OF WARNING:Equity strategists have said that investors should steer clear of stocks in tourism, property, financial, domestic retail and airline sectors in the short term

By Amy Su  /  Staff reporter

The Chinese Nationalist Party’s (KMT) setback in the nine-in-one elections on Saturday might lead the nation’s stock market to face short-term volatility, analysts said.

The KMT won in only six out of 22 cities and counties, with 13 cities or counties going to the Democratic Progressive Party (DPP), including some significant KMT strongholds such as Taoyuan and Greater Taichung.

KMT Taipei City mayoral candidate Sean Lien (連勝文) also lost to independent candidate Ko Wen-je (柯文哲).

“The nation’s equity market might show some volatility in the coming days after the unfavorable election results in Taipei and Greater Taichung for the ruling party,” Masterlink Securities Investment Advisory Corp (元富投顧) president Liu Kun-hsi (劉坤錫) told the Taipei Times by telephone.

The benchmark TAIEX gained 0.24 percent to close at 9,187.15 on Friday.

Liu said he now expects the index to see a downward correction of about 100 points to 9,100 over the next few days.

“However, the impact will be short-term and the stock market will gradually rebound to reflect the nation’s sound fundamentals, as uncertainties over the elections had already been factored in to the market and constrained its performance for this month,” Liu said.

Allianz Global Investors Taiwan Ltd (德盛安聯投信) fund manager Sunny Chung (鍾兆陽) shared Liu’s views.

“Foreign portfolio investors have resumed buying on Taiwanese equities for the past eight consecutive trading days … an indication they are still confident of the nation’s stock market,” Chung said in a statement.

Shares of large-cap electronics companies, which showed a relatively strong performance before the elections, might continue to boost the TAIEX on the back of strong demand fueled by holiday sales in retail sectors in the US and Europe this year, Chung added.

Still, equity strategists have warned investors to stay away from stocks in the tourism, property, financial, domestic retail and airline sectors in the short term, as these sectors are more related to cross-strait ties, which are likely to be affected by the outcome of Saturday’s polls if the KMT government needs to fine-tune its pro-China economic policy.

Financial Supervisory Commission Chairman William Tseng (曾銘宗) said the government would not go so far as to ask government funds to buy in equities to support the market after the elections, as the results might only have impact on the stock market for one or two days.

Although the KMT’s defeat should have limited impact on the market, Deutsche Bank analyst Joelian Tseng (曾慧瓊) said the anticipated effects of the 2016 presidential campaign could lead to greater market volatility, lower trading volume and a reversal in fund flows next year.

Meanwhile, the implementation of new taxes on equity capital gains, personal and dividend income, on top of election uncertainty, could lead to liquidity retreat from local investors, Joelian Tseng said in a research report issued last week before the elections.

Notably, the legislature’s Finance Committee on Thursday is set to review amendments to capital gains tax on stock transactions, which might see the levy imposed from next year.

The amendments might create uncertainty in the equity market, with the committee expected to change the rule of taxing investors who trade more than NT$1 billion (US$32.23 million) in shares a year to those with annual turnover of more than NT$5 billion.

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