The TAIEX tumbled 2.18 percent yesterday as investors pulled out amid concern overseas about Greece’s political and financial future and at home over the government’s plan to tax capital gains on securities investment.
The slump corresponded with falls in major Asian markets and came hours after MSCI, a global investment reading closely tracked by market analysts, cut the weighting of Taiwanese shares in its two regional indices.
The benchmark index dropped 161.07 points to close at 7,234.57.
Turnover expanded to NT$81.03 billion (US$2.73 billion), from NT$68.3 billion a day earlier. Computer and peripheral stocks led the decliners, falling 3.12 percent, followed by auto and electronics shares, which dropped 2.97 percent and 2.82 percent respectively, Taiwan Stock Exchange data showed.
“The pullout [by investors] may persist for a while, driving the main index lower” in the near term, after Greece failed to form a coalition government, stoking concern over its debt woes, Taishin Securities Investment Trust Co (台新投信) said in a research note.
The MSCI adjustment, while in line with market expectations, would deepen the bleak sentiment, the fund manager said. MSCI cut Taiwan’s weighting on the MSCI Emerging Markets Index by 0.01 percentage points to 10.76 percent and by a similar percentage on the MSCI Asia-Pacific Index excluding Japan to 18.09 percent. The adjustments will take effect on May 31.
The preceding quarter saw Taiwan’s weighting virtually intact, ending two consecutive quarters of downward revision.
MSCI removed home appliance supplier Tatung Co (大同) from its global standard indices and added automation equipment maker Airtac International Group (亞德客國際集團) and engineering and construction company CTCI Corp (中鼎工程).
It also added eight Taiwanese stocks to its Global Small Cap Indices, including Medigen Biotechnology Corp (基亞生物科技), Tatung, food maker TTET Union Corp (大統益) and LCD backlit module supplier Ubright Optronics Corp (友輝光電), and removed 25 Taiwanese stocks from these indices.
Foreign institutional players sold a net NT$11.79 billion in local shares yesterday and proprietary dealers trimmed their holdings by a net NT$593.04 million, while mutual funds bought a net NT$275.12 million in shares, stock exchange data showed.
Foreign investors, which account for about a third of overall trading, cut their position by a net NT$56.02 billion this month after selling a net NT$38.77 billion in stocks last month.
A lower risk appetite sapped total assets under management by 0.28 percent last month to NT$1.8 trillion, and took a heavy toll on securities houses’ earnings.
The sector incurred NT$263.04 million in losses last month, reversing a profit of NT$1.75 billion in March, the stock exchange said.
Marbo Securities Consultant Co (萬寶投顧) president Tsai Ming-chang (蔡明彰) said the TAIEX could drop below the 7,000-point mark if a Greek default materializes.
“The government’s plan to push through a capital gains tax may intensify downside risks,” Tsai added.