Share prices closed 1.06 percent lower yesterday in reduced trade as another drop on Wall Street on Friday added to the caution prevailing ahead of the upcoming Lunar New Year break, dealers said.
The weighted index closed down 83.17 points at 7,776.36, after moving between 7,764.51 and 7,826.46, on turnover of NT$77.48 billion (US$2.35 billion).
The market will be closed from Thursday to Feb. 23 for the Lunar New Year holidays.
Wall Street retreated sharply on Friday as the market fretted over a spike in oil prices and comments from two Federal Reserve officials that unexpected economic growth could prompt an interest rate hike.
"The downturn on Wall Street came in time to justify another spate of selling [on the local market] with just three sessions left ahead of a market break for almost two weeks," said an analyst with a leading local investment advisory company, who requested anonymity.
He said one of the biggest uncertainties weighing on sentiment is whether Chinese Nationalist Party (KMT) Chairman Ma Ying-jeou (馬英九) will be indicted on corruption charges before the holiday break.
He said the concern is over whether Ma's indictment would mean he would be barred from next year's presidential race as the KMT candidate, which could jeopardize the chances of political power being handed over to parties favoring more friendly ties with China.
The latest spike in oil prices has also cast doubts over the direction of US monetary policy and consequently, prospects of US shares going forward, the analyst added.
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