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Taiwan stock index drops to lowest level since 2003

Taiwan stocks fell, dragging the benchmark index to its lowest level in more than five years, after the government restored a wider limit by which shares can decline.

The TAIEX lost 212.75, or 4.7 percent, to close at 4,366.87, its lowest since May 23, 2003. The government today reinstated the stock-decline limit to 7 percent, after reducing it to 3.5 percent for two weeks. About 16 stocks fell for each that gained.

Chi Mei Optoelectronics Corp (奇美電子), Taiwan’s second-biggest maker of liquid-crystal displays (LCD), slumped 6.8 percent, leading declines among display makers, after saying it will reduce factory use and cut capital spending.

“There is a lot of pent-up selling pressure because of the 3.5 percent limit drop and it is showing in the market,” said Dick Tsao (曹天倫), who helps manage about US$185 million at Taiwan International Investment Management Co (金鼎投信) in Taipei.

The TAIEX has lost 24 percent this month as part of a rout that has wiped US$11 trillion in value from global stock markets and prompted governments across the world to introduce measures to limit declines. MSCI’s index of developed and emerging stock markets plunged 48 percent this year, headed for its worst year on record, as credit-related losses at financial companies worldwide topped US$680 billion.

Taiwan’s financial regulator said it would keep its ban on short selling, introduced on Oct. 1, until the end of the year, it said in a statement yesterday.

The government also plans to let the National Stabilization Fund to continue supporting the stock market, the Financial Supervisory Commission said yesterday. The fund is presently participating in 249 stock buyback programs, with the largest worth as much as NT$85 billion (US$2.5 billion), according to the statement.

Chi Mei declined NT$1, or 6.8 percent, to NT$13.75. The LCD maker will reduce factory use to 60 percent to 70 percent in the current quarter, and cut capital spending by more than half to less than NT$50 billion next year after posting its first loss in six quarters.

AU Optronics Corp (友達光電), the world’s third-largest maker of LCDs, also fell by its daily limit to NT$23.10.
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