Tue, Mar 09, 2004 page11

• TAIEX falls as vote approaches

  JITTERS The market dropped further off last week's 7,000 and analysts expressed contradictory views about where stocks are headed and what the election means

  • By Joyce Huang / STAFF REPORTER
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  Shares dropped 0.6 percent yesterday on reduced trading, shedding 42.20 to 6,901.48, as investors said a short-term pullback is possible before the March 20 election -- and that the recent surge to break 7,000 on the TAIEX was not healthy.

  "The benchmark fell on sell-offs meant to lock in profits ahead of the presidential elections," said Renee Chan (詹茹心), deputy manager in the marketing department at HSBC Asset Management Ltd (匯豐中華證券).

  "But foreign investors are still buying, banking on the big bull run before election day," she said.

  Overseas investors bought a single-day record high of US$19.4 billion in stock last Tuesday and a record high of US$64.4 billion last week, Chan said, citing statistics compiled by the Taiwan Stock Exchange Corp.

  Another analyst said the lack of clarity in the election is likely to hold back investors before the vote.

  "The benchmark, bolstered by quite a few short-term speculators, is likely to hover between 6,800 and 7,000 points in the next two weeks," said Shih Sheng-fa (施勝發), a manager in the asset management department at Prudential Securities Investment Trust Co (保誠投信).

  Last week, the TAIEX hit 7,034 on Thursday but fell back to 6,943.68 on Friday.

  Shares in Taiwan Semiconductor Manufacturing Co (台積電), the world's largest supplier of made-to-order computer chips, dropped 1.5 percent to NT$66 yesterday. Rival United Microelectronics Corp (聯電) shed 1.8 percent to close at NT$33.40.

  Though some have suggested that the TAIEX may continue sliding, Chan expressed confidence in the market, saying that as long as the index stays above 6,800 points, a bullish market may be foreseeable in the near term.

  Shih is less optimistic, however, saying that the post-election benchmark is not likely to experience another jump as big as the one last Thursday.

  "On the contrary, post-election stock performance may be disappointing," Shih said.

  "Even if there's an uptrend, there will be little room for a big jump since businesses in April and May are seasonally slow," Shih said.

  In the long run, Shih said that the stock market will reflect the nation's improving economic fundamentals and surge to between 7,500 and 8,000 points in the third quarter, led by the electronics and financial sectors.

  Some market watchers predict that the benchmark will rise to break 8,000 and push toward 9,000 by the year's end.

  Despite the market's slow upward trend, a local analyst, who declined to be identified, said yesterday that politics may have a negative impact on the market's future performance.

  He said that the government is the biggest behind-the-scenes booster of pre-election stock performance. He also said that many Taiwanese enterprises had posed as overseas investors to buy in to the TAIEX in support of certain political parties.

  Political uncertainty, therefore, clouds the TAIEX's performance, he said, adding that, "The market gets riskier as election day draws closer and possibly triggers irrational movements."

  Economic uncertainty also poses a threat since Taiwan is likely suffering both deflationary and inflationary pressures as a result of rising raw-materials prices and declining commodity prices while Asian countries -- including Taiwan -- resist appreciation of their under-valued currencies.

  The analyst expressed a bearish view on post-election stock performance. He said that if President Chen Shui-bian (陳水扁) wins re-election, the TAIEX may only see short-term improvement.

  The analyst said that if Chinese Nationalist Party (KMT) Chairman Lien Chan (連戰) wins, a transfer of power may translate into market chaos for at least one quarter, although Lien's victory may guarantee a rosier performance for the benchmark in the long run.
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