The TAIEX plunged 3.57 percent to close at 7,342.96 yesterday on the back of heavy falls in Europe and Wall Street overnight, as fears over a new global recession deepened, driving investors across Asia to dump shares.
That made Taipei the second-worst performer in Asia after South Korea’s 6.22 percent drop, one day after Morgan Stanley painted the US and Europe as “dangerously close to recession” and Taiwan cut its GDP growth forecast to 4.81 percent for this year, from the 5.01 percent estimated last month.
“The economic landscapes at home and abroad look increasingly rugged ahead,” Schroders Investment Management Taiwan vice president Tony Chen (陳同力) said.
The dimming outlook will feed investor jitters and drag the main index lower until European and US equity markets show signs of stabilization, he said.
“The confidence crisis, warranted or not, may develop into a self-fulfilling prophecy and hurt companies as well as the economy,” the analyst said. “Many firms’ shares are undervalued.”
Hua Nan Securities Co (華南永昌證券) chairman David Chu (儲祥生) also said Taiwan was following the international trend and local stocks were not likely to rebound unless the problems in the international markets were resolved.
Turnover reached NT$120.96 billion (US$4.18 billion) with losses nearly across the board, as more -foreign funds pulled out, Taiwan Stock Exchange statistics indicated.
Foreign investors sold a net NT$5.79 billion in local shares, while proprietary dealers and trust firms slashed a net NT$2.69 billion and NT$1.09 billion respectively, based on stock exchange data. That helped push the local currency down to a four-month low against the US dollar.
The New Taiwan dollar closed at NT$29.076 in Taipei trading yesterday, the weakest since April 18, according to central bank data.
Altogether, the TAIEX shed another 3.85 percent, or 294.06 points, in a week that saw foreign players unloading a net NT$37.76 billion in local shares, the Taiwan Stock Exchange said, adding that net -selling totaled NT$201.96 -billion so far this month.
In an attempt to calm the market, Government Information Office Minister Philip Yang (楊永明) reiterated yesterday that the nation’s economic fundamentals remained healthy despite the market turmoil.
Vice Premier Sean Chen (陳冲), who also chairs the National Stabilization Fund, called a meeting of economic and financial officials in the morning, but concluded that the situation did not merit intervention.
Blue-chip names led the tumble, as shares in HTC Corp (宏達電), the world’s No. 5 smartphone brand, closed down by the daily limit to NT$719, while shares in Largan Precision Co (大立光), Taiwan’s largest handset lens-maker, sank equally to NT$776, Taiwan Stock Exchange data showed.
JPMorgan Asset Management (摩根富林明投信) analyst James Yeh (葉鴻儒) said the TAIEX has yet to hit bottom and investors should be cautious.
Yeh suggested cutting holdings in technology shares because the sluggish recovery in the West would weaken the earnings of export--focused manufacturers.
ADDITIONAL REPORTING BY CNA