The stock market tumbled to a more than two-month low as rising concerns over the impact of US subprime loan problems weighed on the market and triggered sell-offs across Asia.
"The US subprime mortgage issue has soured foreign fund managers' appetites for riskier equity markets and caused a meltdown of local investor's confidence," said Andrew Teng (
The benchmark index fell 391.67 points or 4.6 percent to 8,201.37 yesterday -- its lowest level since hitting 8,249.9 on June 1, Taiwan Stock Exchange data showed.
The 391.67-point decline yesterday marked the sixth-biggest single-day drop since 2000. The benchmark TAIEX has lost 737.59 points or 8.2 percent over the past three days, the stock exchange's data showed.
With investors dumping shares, market turnover yesterday rose to NT$180.26 billion (US$5.44 billion), with foreign institutional investors extending their sale of local shares.
"Financial stocks bore the brunt because of growing fears that the US credit squeeze may spread to other markets around the world," Teng said. "As uncertainty remains, I do not expect a sharp V-shaped rebound soon."
The financial index fell 3.97 percent despite a government report last Friday that domestic banks' exposure to US subprime mortgage-related instruments was limited, with losses reaching approximately NT$1.2 billion.
Shares of Cathay Financial Holding Co (
Foreign investors unloaded a net NT$38.45 billion in shares yesterday, with net sales over the past three days totaling NT$64.79 billion, the stock exchange's data showed.
Stocks dumped by foreign investors included Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's biggest contract chipmaker, and Chinatrust Financial Holding Co (中信金控), owner of the nation's largest credit card issuer.
Shares of TSMC fell 3.1 percent to NT$59.1, and those of Chinatrust Financial were down 2.5 percent to NT$21.65.
Trading among local institutional investors was mixed, with investment trust companies purchasing a net NT$1 billion in shares and proprietary traders selling a net NT$2.41 billion.
"Investors sold shares irrationally without considering their fundamentals. They just wanted to get back their money as fast as they could," said Kevin Chung (鐘國忠), a research analyst with Jih Sun Securities Investment Consulting Co (日盛投顧).
The TAIEX fell at a much faster pace than its export rivals, Singapore and Hong Kong. Singapore's Straits Times Index fell 3.7 percent, while Hong Kong's Hang Seng Index dropped 3.3 percent yesterday, Chung said.
"This is an indication that local investors overreacted to the impact of the US housing loan problem," Chung said.
Meanwhile, the NT dollar continued to fall against its US counterpart amid continued foreign capital outflows and increased US dollar demand from importers.
The NT dollar depreciated NT$0.118 to close at US$33.128 against the greenback yesterday -- its weakest closing since July 15.
Turnover surged to US$1.258 billion from US$946 million in the previous day, Taipei Forex Inc's figures showed.
Addressing investor concern over a potential international credit squeeze, central bank Governor Perng Fai-nan (彭淮南) said that the nation's economic fundamentals remained healthy.
"The exchange rate of the NT dollar is still relatively stable [compared to other currencies] ... and the central bank will support [market] liquidity," Perng said.
Based on the central bank's latest data, the NT dollar was down 0.36 percent against the US dollar yesterday, compared with a 0.76 percent drop in the Japanese yen and a 3.58 percent decline in the New Zealand dollar.
Perng declined to say whether the central bank had intervened in the forex market yesterday, stressing only that the economy was in a good shape.
Chung, however, advised caution. He suggested investors take more conservative moves by buying blue-chips in traditional industries, such as the nation's biggest polyvinyl chloride supplier Formosa Plastics Corp (