Taiwan’s benchmark index plunged to its lowest level in more than two years yesterday, taking its cue from the tumbling US stock market amid deepening concerns over a double-dip recession after the IMF warned about increasing risks in the US and eurozone economies.
The TAIEX fell below the psychological level of 7,000 points during the first 40 minutes of trading. The index pared some of its losses to close 3.55 percent lower at 7,046.22. While the index dropped through an important technical level of 7,148.76 — an intraday-low set on Aug. 9 that prompted government funds to shore up local shares at the time — there were no signs yesterday that government funds had entered the market.
The decline of local shares yesterday came on the heels of a 3.51 percent decline on Wall Street on Thursday, as the US Federal Reserve’s latest “operation twist” policy failed to impress investors. The Fed said it planned to sell US$400 billion in short-term debt and to buy US Treasuries with longer maturities, from six to 30 years, to stave off rising risk.
Photo: CNA
“The US and European debt crisis weighed down the local stock market as the IMF has raised its concern over the economies there. Weak economic growth will freeze electronics consumption and thereby hurt Taiwan’s exporters,” said Henry Chen (陳志恆), a stock market analyst at KBC Concord Asset Management Co (康和比聯投信), by telephone.
The TAIEX ended at the weakest level since Sept. 2, 2009, and it triggered a continued fall in the New Taiwan dollar, which closed at NT$30.388 to the US dollar.
For the week, the local stock market ended 7.02 percent lower than the previous week, the third straight weekly loss. The index has fallen more than 23 percent since an intraday high of 9,221 set in early February, Taiwan Stock Exchange data showed.
Foreign investors were forced to sell their overseas assets, mostly in emerging markets, to raise cash to cope with a new wave of client redemptions in home markets given the faltering economy, Chen said.
Foreign investors sold a net NT$15.14 billion (US$496.5 million) worth of local shares, with Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), HannStar Display Corp (瀚宇彩晶) and Advanced Semiconductor Engineering Inc (ASE, 日月光半導體) topping their selling list, according to stock exchange statistics.
The shares of the world’s biggest contract chipmaker, TSMC, slid 2.17 percent to NT$67.5, while ASE, the biggest chip packager, saw its share price tumble 4.06 percent to NT$27.15. The stock price of LCD maker HannStar fell 6.44 percent to NT$2.18.
To calm jittery investors, Financial Supervisory Commission Chairman Chen Yuh-chang (陳裕璋) told legislators that the local stock market’s decline matched its Asian peers and the commission would take countermeasures if anything unusual was detected.
Central bank Governor Perng Fai-nan (彭淮南) told lawmakers that the outflow of foreign funds has driven the NT dollar lower and that the bank would closely monitor the market to keep the local currency on a reasonably stable track.
Next week, Henry Chen expects a rebound on the local stock market and the TAIEX could hold up at a level above 7,000 as government funds are likely to enter the market to boost investors’ confidence before the presidential election in January, especially as the Chinese Nationalist Party’s (KMT) lead in recent polls has been marginal.
However, TLG Asset -Management (台壽保投信) analyst Arch Shih (施博元) said under current unfavorable global market conditions, the local bourse could drop further. He expects the local bourse to test 7,000 points again on a lack of confidence.
With Additional Reporting by CNA
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