International ratings agency Standard and Poor's yesterday said that political uncertainties across the Taiwan Strait would continue to weigh on local stocks in the near term, making the local bourse one of the poorest performers among stock markets in Asia.
S&P gave an "underweight" rating on Taiwanese stocks. Early last month it rated the Hong Kong stock market as "overweight." South Korean and Chinese stock markets were given a "market weight" rating, during the latest review.
Unstable
"We won't be too optimistic about the Taiwan stock market in the next few months as the renewed political uncertainty remains unsettled," S&P analyst Robert Lin (
Lin made the remarks on the sidelines of a press conference to announce the S&P fund awards this year.
More than 1,000 funds participated in this year's competition.
"The Taiwanese government's shifting position on cross-strait relations increases the political risk," Lin said.
President Chen Shui-bian's (
Foreign purchases
"Foreign investors have made heavy purchases of local stocks over the past few months, but this failed to buoy weak sentiment," Lin said.
As of yesterday, the benchmark TAIEX has risen by 0.4 percent to 6,486.47 points since the beginning of the year, while overseas fund managers bought a net NT$121.91 billion (US$3.75 billion) worth of local shares during the same period, according to the Taiwan Stock Exchange Corp's figures.
Foreign investors, which own about one-third of Taiwanese shares, bought a net NT$719.4 billion in local stocks last year.
In addition to the lack of stability in relations with China, Lin said that prolonged restrictions on Taiwanese companies' investments in China have led to an exodus of local firms in search of alternative markets to raise funds.
Looking elsewhere
"Hong Kong has the potential to replace Taiwan [as the top choice of local firms for initial public offerings] because of a lower threshold and greater exposure to foreign investors," Lin said.
The government caps companies' investments in their Chinese operations at 40 percent of their net value.
"Foxconn International Holdings Ltd's (富士康控股) success sets a model for Taiwanese companies," he said.
Foxconn, which makes phones for Nokia Oyj, is a handset manufacturing arm of Taiwan's top electronics component maker Hon Hai Precision Industry Co (
Hon Hai is planning to list another electronics component-making subsidiary, Foxconn Advanced Technology Inc (
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