The TAIEX is set to slump further today — after shedding 2.3 percent on Friday — as it reflects nosedives in Wall Street and European bourses following Britain’s vote to leave the EU, analysts said yesterday.
The dividend issuances of major technology and financial companies would also put pressure on their market values and the main board, the analysts said.
“The local bourse is bound to open lower on Monday as ‘Brexit’-linked uncertainty continues to unnerve investors and drive changes in fund allocation strategies,” state-run Hua Nan Securities Co (華南永昌投顧) chairman David Chu (儲祥生) said by telephone.
Wall Street tumbled 3.39 percent on Friday after the pan-European STOXX 600 Index closed down about 7 percent, with France’s CAC 40 Index plummeting about 8 percent, Germany’s DAX Index dropping 6.8 percent and Italy’s FTSE MIB and Spain’s IBEX 35 falling more than 12 percent.
The declines are deeper than those of the TAIEX, suggesting room for more corrections in trade between Taiwan and the UK is quite limited, Chu said.
If foreign funds pull out of emerging markets — as has happened before in times of global financial turmoil — Taiwanese shares would suffer, as retail investors have mostly lost interest, Chu said.
Foreign institutional players sold NT$13.02 billion (US$400.6 million) worth of local shares on Friday, and it remains to be seen if that is just an isolated incidence or the start of a sustained pullout, Chu said.
Prior to Britain’s vote to leave the EU, foreign funds increased holdings in local shares by NT$42.79 billion, as the high sales season for upstream technology products is approaching, the analyst said.
The National Financial Stabilization Fund has indicated it is willing to intervene today if necessary to help stabilize the market.
Taiwan Semiconductor Manufacturing Co (台積電), Cathay Financial Holding Co (國泰金), Fubon Financial Holding Co (富邦金) and other firms are due to issue cash dividends today, which could knock 70 points off the TAIEX when the market opens, Masterlink Securities Investment Advisory Corp (元富投顧) president Liu Kun-hsi (劉坤錫) said.
The local bourse is fragile to external shocks, but this time the magnitude could be moderate due to limited exposure of local firms to the UK, Liu said by telephone.
The TAIEX might find support at 8,350, because the peak sales season for technology products is approaching, Liu said.
Brexit has increased the chance of a rate cut by the central bank, which is to review its rate policy in a board meeting on Thursday, both analysts said.
Volatile financial markets might disrupt economic growth for most nations worldwide, giving the central bank reasons to further ease monetary policy, Chu and Liu said.
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