Mon, Nov 06, 2006 page12

• Stocks immune to Wu case: analysts

  STORM IN A TEACUP? Analysts retained their views that the TAIEX would peak at a high of 7,400 points in the current quarter, irrespective of the first lady's indictment

  • By Amber Chung / STAFF REPORTER
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  Any political turmoil that may arise in the wake of the indictment of first lady Wu Shu-jen (吳淑珍) should have limited impact on the local stock market, which is immune to the political risk, analysts said yesterday.

  "We are not that bearish [about the market]," Jason Huang (黃崇恩), assistant manager at UOB Investment Adviser (Taiwan) Ltd, said in a telephone interview yesterday.

  The escalating political struggle is likely to weigh down the stock market, but not much, as investors have mostly factored in the uncertainty during the investigations into the first family's alleged misuse of state funds over the past few months, Huang said.

  The downside could be as little as a one-day loss on the TAIEX, while the benchmark index is expected to see strong support at 6,900 points to 7,000 points, he said.

  Last Friday, the TAIEX rose 83.51 points, or 1.2 percent, to a five-month high of 7161.61 before the indictment was announced to the public in the afternoon.

  Foreign investors bought a net of NT$5.95 billion (US$180 million) last Friday, bringing their net share purchases to NT$10.23 billion in the first three days of this month, according to Taiwan Stock Exchange data.

  "We do not expect a turnaround of foreign investors' investment strategy in the Taiwanese market caused by the incident," said Clive Hsueh (薛宗傑), manager of proprietary trading group at IBT Securities Co (台灣工銀證券) at Industrial Bank of Taiwan (台灣工業銀行).

  Hsueh cited the Thai bourse that saw only a one-day sell-off from overseas investors after the military coup in September before returning to normal. Taiwan's political situation was much less serious, he said.

  Neither analyst anticipated that any new attempt to recall President Chen Shui-bian (陳水扁) by the opposition camp would dent investment sentiment and depress the market.

  Unless Chen resorted to some irrational or hard-line political tactic -- like declaring a curfew or martial law -- the stock market would remain stable, Hsueh said.

  To soothe investors, Shih Jun-ji (施俊吉), chairman of the Financial Supervisory Commission, said the accusations against the first family for alleged misuse of state funds is not new to the public and would not pose a grave threat to financial markets.

  Listed companies in the Taiwan Stock Exchange and GRETAI Securities Market saw growth of 25.94 percent and 107.49 percent in their pre-tax income last quarter over last year ago, the commission said in a statement released yesterday.

  Publicly traded firms had an average pre-tax margin of 10.44 percent in the three months to Sept. 30, up from 9.51 percent in the first half and 8.97 percent in the comparable period of last year, the statement read.

  "All this indicates healthy industry fundamentals and growing profitability," the commission said.

  Analysts retained their views that the TAIEX would peak at a high of 7,400 points in the current quarter.

  "The correction would give investors a good opportunity for bottom fishing for decent investment targets," Huang said.

  They suggested investors include China-concept stocks in their portfolios, which benefit from the country's fast-growing demand, including Uni-President Enterprises Corp (統一企業), Taiwan's leading producer of processed food, and First Steamship Co (益航), which has a chain of department stores in China.

  Vietnam-concept stocks that have invested in the growing economy are good targets as well, including Formosa Plastics Corp (台塑), and wire and cable makers.
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