Tue, Mar 14, 2000 page17

• Market's fall a chance to buy: analysts

  BIG DIPPER Although some suspect yesterday's drop was the KMT's signal of what to expect if it loses Saturday's election, foreign investors saw another type of signal, one that said buy

  • By Michael Logan / STAFF REPORTER
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  Despite a 6.6 percent plunge in the nation's main stock index yesterday, equity analysts say it's buying time -- not crying time.

  Afterall, many of Taiwan's companies are poised for stellar earnings growth this year. In addition, fundamentals will once again rule the market after the political jitters surrounding the presidential election pass, they say.

  "None of us saw this coming, that's for sure," said Ralph Dixon, head of sales at Primasia Securities.

  

  A billboard in downtown Taipei shows the stock market's benchmark index plunging 617.65 points, or 6.6 percent, to close at 8811.95. Some analysts said the the slump was largely due to an orchestrated sell-off by the ruling KMT to scare voters away from supporting the opposition candidate Chen Shui-bian.

  PHOTO: AFP

  Before the big dip, many analysts had expected the TAIEX to trade between 9,300 and 9,800 this week as investors remained on the sidelines in the run-up to Saturday's presidential election.

  But over the weekend the market -- which is made up mostly of retail investors -- developed the view that the KMT will likely lose its grip on power.

  As a result, stocks fell 617.65 to 8,811.95. The Over-the-Counter index didn't escape unscathed either, dropping 17.17 points to 259.29, or 6.24 percent.

  Since reaching a 52-week high of 10,202.20 on Feb. 17, the TAIEX has fallen 13.6 percent -- well inside correction territory.

  "The market has lost confidence that Lien Chan (連戰) will be elected," said Grace Li, research manager at MasterLink Securities. "The market may not know who the winner will be. But they know who won't be elected," Li said, referring to Lien, the vice president and the KMT's presidential candidate.

  Li said the media's weekend coverage of well-attended campaign rallies for independent James Soong (宋楚瑜) and DPP candidate Chen Shui-bian (陳水扁) had created the perception that Lien will likely lose this Saturday.

  In addition, Chen has lined up popular public figures such as Acer chairman Stan Shih (施振榮) and Academia Sinica head Lee Yuan-tseh (李遠哲) to advise his government should he get elected.

  "Most of them are heavyweight enterprise leaders or cultural leaders," Li said. "It shows they're ready to be a government."

  Furthermore, Li suggested, the KMT may have let the market slide to illustrate the outcome of a Chen victory.

  "There's a possibility that they want to show the negative effects of the DPP getting elected. It's a signal," Li said.

  But it was a signal of another sort for foreign institutional investors -- a buy signal.

  Foreign investors bought a net NT$4.2 billion in stocks yesterday, on top of a net NT$4.9 billion Friday. For the month, these investors have purchased a net NT$24.6 billion in equities.

  Meanwhile, the Ministry of Finance said the four government linked funds bought a net NT$7.3 billion in shares yesterday.

  "One should be a buyer as the foreigners were," Primasia's Dixon said. "I think you'll see foreigners continuing to be buyers in this market."

  Dixon said there's was a possibility of rebound as early as today, though investors will be "waiting for the fall out to be complete" before jumping back in.

  The TAIEX dropped roughly 600 points in the first half hour of trade yesterday and stayed down for much of the day. Because volume dried up about mid-session, that indicates there's still potential downside left.

  Dixon said there was support at 8,600 and very strong support at 8,200. Li said the TAIEX would dip no further than 8,300.

  "If you have some cash on hand, you could find some very good stocks at a very good price," Li said. "This drastic fall could be a very good opportunity to buy for the long-term."

  One long-term market bull that has been advising investors to buy in the event of a politically inspired market correction has been Neal Stovicek, head of equity research at National Securities Corp.

  Stovicek favors high-tech companies such as chipmakers Taiwan Semiconductor Manufacturing Company (TSMC, 台積電) and United Microelectronics Corp (聯電) and e-commerce play President Chain Store Corp (統一超商).

  "Whoever wins, will their policy change TSMC's corporate strategy?" Stovicek asked.

  And while there may be a change of power, he said, the nation's economic goal remains the same: improving the standard of living for Taiwanese.

  "Whoever comes in, their policies will essentially be the same," he said. As such, little change in the nation's tax and monetary policies is expected.

  Stovicek said that investors, instead of paying attention to the market's overall decline, should concentrate on the value opportunities the downturn has created.

  For example, at the close of the bell yesterday, TSMC, the world's largest contract chip foundry, was priced at just 31.29 times consensus estimates of NT$5.816 per share.

  "Look at the underlying value in individual shares," Stovicek said. "Investors are not buying the market -- they're buying individual shares."

  For your information

  A big, bad day for the Taiwan share market

  * The TAIEX fell 617.65, or 6.6 percent, to 8,811.95 * Within the index 444 stocks closed limit-down * The Ministry of Finance, says the four government-linked funds bought a net NT$7.3 billion in stocks yesterday * TSMC fell NT$13, or 6.8 percent, to NT$182 * United Microelectronics Corp fell NT$7, or 6.5 percent, to NT$100
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