Analysts are predicting Taiwan's stock market will sink today in reaction to the premier's announcement last Friday to terminate the Fourth Nuclear Power Plant (
Premier Chang Chun-hsiung (
Enraged at the decision that snubbed opposition party input, the People First Party and the KMT -- who together hold almost two-thirds of the seats in the legislature -- are now collaborating on retaliatory measures, including a no-confidence vote by lawmakers or even impeachment proceedings against the president.
With the current daily downward volatility set at 3.5 percent, analysts say they expect most shares to drop limit down today through Nov. 7 -- the date of the US presidential election.
Pessimistic industry watchers say turnover is expected to remain low -- between NT$10 billion to NT$20 billion -- and the TAIEX is likely to fall below 5,000 points in the near-term. The only major buyer is likely to be the Government Stabilization Fund.
The TAIEX closed at 5,805 point last Friday, after declining 136 points.
A number of local securities analysts and foreign investors said Chang's decision will have a devastating effect on the local stock market.
The TAIEX is expected to test the 5,500-point level early this week. If that level fails to support the market, the TAIEX would then test 5,000 points, while most analysts expect the TAIEX may drop below 5,000 points later this week regardless.
The Ministry of Finance last night released four points to bolster investor confidence in the market. First was that investors should not lose faith in the market's fundamentals. Second, that the volatility in the market should not be a cause for concern. Third, that the National Stabilization Fund still has enough money to support the market and that it is prepared to enter the market whenever it is needed. Last, the former six measures to assist the market are still in force.
Local fund managers said the TAIEX would first test 5,422 points, based on foreign investors' trading, movement in the foreign exchange market and the impact of the National Stabilization Fund (
Foreign investors have been even more pessimistic on the Fourth Nuclear Power Plant issue, describing the issue as "disappointing."
Meanwhile, the instability in the Legislative Yuan triggered by the issue could generate more bearish effects on the stock market.
"After the Fourth Nuclear Power Plant project was nixed, short-term investors who bought shares in the recent rebound are likely to dump them en masse this week. It raises the possibility that the TAIEX will drop below 5,000 points," said an executive of an American securities company who declined to be named.
"When Minister of Economic Affairs Lin Hsin-yi (
"However, since the Executive Yuan at the time had not made its final decision [on the power plant], investors still had hope. But since Chang made the decision final Friday, it is going to have a devastating effect on the stock market -- even worse than before."
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