TAIEX slides 119 points, ends at new low for year

The nation's stock market hit a new low for the year after a private think tank forecast economic growth in the second quarter would hit just 1 percent.

The TAIEX slid 119.22 points, or 2.43 percent, to 4,785.12 yesterday, after being closed on Monday for Dragon Boat Festival.

Turnover was low -- some NT$36.6 billion (US$1.06 billion) changed hands -- and market sentiment was grim, analysts said.

All the eight major categories of stocks lost ground, with cement stocks plunging 3.5 percent; food issues falling 2.9 percent and plastics and chemical issues dropping 2 percent.

Textiles also slid 1.9 percent; electronics issues declined 2.9 percent; paper stocks moved down 1.8 percent; construction issues dove 2.4 percent; and financial issues dropped by 1.3 percent.

The report by the Taiwan Institute of Economic Research predicted the nation's economic growth in the second quarter would come in at just 1 percent -- far less than the government's forecast of 3 percent.

Wu Rong-i (吳榮義), president of the research institute, said that the government's 3-percent prediction assumes that the administration's economic stimulus measures can be approved by the Legislative Yuan and be implemented effectively.

According to the report, the economy will not begin to show signs of recovery until the end of the third quarter or the beginning of the fourth quarter.

The report also said that "unpredictable factors" such as the US' economic recovery and an improvement in the international economic climate remain key to Taiwan's economic prospects.

In addition, both the legislature and the administration should improve their efficiency in order to create a better domestic investment environment, thereby boosting domestic demand, encouraging infrastructure investment and relaxing monetary policies, according to the report.

Meanwhile, despite yesterday's plunge in the bourse, the vice premier and convener of the National Stabilization Fund, Lai In-jaw (賴英照), said the recent trading range for the stock market between 4,800 and 5,200 points was normal, a Chinese-language newspaper reported yesterday.

A Cabinet official was quoted as saying that unless non-economic factors impacted the market, the fund would be sidelined and there was currently no need for it to enter the market.