The local bourse may continue to see light trading in the short term despite measures to invigorate the market as poor corporate earnings results weaken investor confidence, analysts said yesterday.
The TAIEX fell 0.31 percent, or 22.6 points, to 7,314.88 yesterday on a turnover of NT$57.37 billion (US$1.95 billion), Taiwan Stock Exchange data showed, compared with daily average of NT$65.9 billion for last month.
“The main index is unlikely to see active movements either way in light of the small volume,” Capital Securities Corp (群益證券) analyst Alan Tseng (曾炎裕) said.
Sluggish trading is not a healthy sign for equities markets because it reflects a low appetite for risk as well as low liquidity, Tseng added.
To reverse the situation, the Financial Supervisory Commission on Monday unveiled plans to ease daily trading limits by 50 percent after urging securities houses to cut interest rates on margin loans. Borrowing costs for margin loans currently hover at about 6 percent.
Even so, turnover shrank to NT$45.87 billion on Tuesday, the second-lowest level this year, from NT$49.08 billion on Monday, after US technology giants Microsoft Corp, Google Inc, IBM Corp and Advanced Micro Devices Inc released weak earnings figures for the last quarter and expected business conditions to toughen, analysts said.
The gloomy picture will inevitably affect Taiwanese firms, many of whom rely on foreign orders for manufacturing electronic products and parts, Tseng said.
Chipmaker Taiwan Semiconductor Manufacturing Co (台積電), flat panel maker AU Optronics Corp (友達) and camera lens supplier Largan Precision Co (大立光) are to publish third-quarter results today.
Smartphone vendor HTC Corp (宏達電) and chip packager Advanced Semiconductor Manufacturing Co (日月光半導體) will follow suit tomorrow.
“The proposed market stimulus measures would be ineffective in boosting a bourse that is likely the worst performer in the region this year,” Tseng said.
Grand Fortune Securities Co (福邦證券) chairman Jerry Huang (黃顯華) said the government should reconsider taxing capital gains on securities investments if it is serious about ending the confidence crisis. The levy, which will take effect next year, cannot shake its share of blame in dragging down the TAIEX and trading volume, he said.
Securities houses are heavily reliant on brokerage business for income and need a daily market turnover of NT$80 billion to break even, Taiwan Securities Association (證券公會) said earlier this year.
Schroders Investment Management Taiwan vice president Tony Chen (陳同力) said the TAIEX may fluctuate within a tight range until the market absorbs earnings results of major firms at home and abroad.
“In particular, Apple Inc’s earnings report, which is due out today in the US, may shed some light on the business prospects of its local supply chain,” he said.