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Investors run for the exits after Chen's speech

Local stock investors yesterday panicked over President Chen Shui-bian's (陳水扁) call for referendum legislation, causing the TAIEX to plunge 5.8 percent to 4,636,67, its lowest point since November.

The 284.22-point drop was seen by many as a nervous reaction to China's denouncement of Chen's remarks.

To alleviate investor anxiety, Minister of Finance Lee Yung-san (李庸三) yesterday held an impromptu press conference after the stock market closed, urging shareholders to stay put.

"Investors overreacted to the [political] incident, causing themselves losses unnecessarily," Lee said. "Optimistically speaking, now is actually a good time for investors to do some bottom-fishing," he said.

Lee said that due to a slower-than-expected economic recovery, the performance of international stock markets -- including the Dow Jones Industrial Average and the NASDAQ -- is on a downward slope. He said the TAIEX has followed that trend.

The minister said that institutional investors yesterday didn't dump many shares, buying a total of NT$7.2 billion in stocks while selling some NT$8.7 billion. The NT$1.5 billion discrepancy was due to local investment trusts who sold a net NT$507.9 million of stocks and proprietary traders who sold a net NT$664.1 million. Overseas investors, who own about a fifth of Taiwan stocks by market value, sold a net NT$337.8 million, Lee said.

Despite the market's heavy losses, Lee said the ministry does not intend to activate the government's National Stabilization Fund to prop up the TAIEX.

But he did say the ministry's Securities and Future Commission would be closely watching what develops in the next few days.

Lee bluntly rejected market speculation that the latest cross-strait tension will drive the TAIEX to drop as much as 1,500 points within one month, as it did after former president Lee Teng-hui (李登輝) made his "special state-to-state" comment in 1999.

Sharing a similar view, Franc Chien (錢宜成), associate vice president of Taiwan Securities Co (台証證券), said that a declining NASDAQ will continue to be a drag on Taiwan's electronics industries.

"The TAIEX won't see a rebound before mid-August anyway," Chien said. But the stock market may continue to drop unless China stops its military threats and Taiwan softens its stance to ease tension, Chien said.

Local business leaders yesterday voiced worries over the state of cross-strait relations in light of Chen's remarks.

Luo Huai-jia (羅懷家), executive director of the industry policy center at the Taiwan Electrical and Electronic Manufacturers' Association (電電公會), said that while Chen's description of the nation's status quo may articulate an unspoken truth, it nevertheless throws an unnecessary timebomb into cross-strait development and the progress of direct-links negotiations.

"While trying to clarify the current ambiguous nature of cross-strait affairs, [Chen] may end up forcing both sides to re-ignite their political wrangling and disagreement," Luo said.

Luo raised concerns that China may step up its pressure on the US, unilaterally deciding Taiwan's future between the two superpowers.

Theodore Huang (黃茂雄), chairman of the Chinese National Association of Industry and Commerce (工商協進會), also expressed his hope yesterday that Chen's remarks wouldn't negatively impact the implementation of direct links, his secretary said.

The nation's most outspoken business tycoon, Wang Yung-ching (王永慶), chairman of Formosa Plastics Group (台塑集團), was even more pessimistic, telling reporters that Chen's remarks "have made retrogress the possibility of talks on direct links."

"The move was unexpected and unnecessary," Wang said.

Day Sheng-tong (戴勝通), president of the National Association of Small and Medium-Size Enterprises (中小企業協會), however, disagreed with Wang.

Day said that he believed that Chen made the provocative remarks as a last resort to bring China to the negotiating table, since his goodwill gestures over the past two years have gone ignored.

Day urged leaders of both sides to downplay political talks and focus on joint economic efforts.

Day also said that Chen's move wouldn't affect people's everyday lives.
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