Shares on the TAIEX are expected to lead the local stock market lower today, following accusations of fraud against Goldman Sachs by the US Securities and Exchange Commission (SEC), which sent global stock markets plunging on Friday, analysts said yesterday.
The market is expected to experience further corrections during the first two days of trading as foreign investors began selling on Friday, they said.
The TAIEX reached a new high last week.
However, a rebound remains possible in the next few days, as the case could be an isolated incident, in which case it would have a limited impact on the TAIEX, the analysts said.
BOOSTS
The market could be boosted in the last few days of trading amid bargain-buying or as a result of tomorrow’s legislative vote on an amendment to the Income Tax Act (所得稅法), which proposes lowering the corporate income tax rate to 17 percent from 20 percent, they said.
A Chinese-language United Daily News report said that if the fraud suit prompted selling, particularly among foreign institutional investors, it could make it difficult for the TAIEX to remain above the 8,000-point mark.
However, the report also cited Chen Kuan-rong (陳冠融), chief of an asset management company, as saying that if the Goldman Sachs fraud case is an isolated incident, there would be no long-term impact on the fundamentals of the TAIEX.
Chen said that with the TAIEX having reached a high for this year of about 8,100 points, if no new strength is injected into the market, the benchmark index could pull back to between 7,600 and 7,800 points.
FALLOUT
Another Chinese-language publication, the Economic Daily News, quoted Wu Zu-wang (吳祖望), a fund manager at Shin Kong Investment Trust Co (新光投信), as saying that while he does not expect the fraud case to have a serious impact on the TAIEX, he believed the effetcs from the recent volcanic eruption in Iceland could spread.
The eruption has disrupted flights throughout Europe and sent shares of China Airlines (華航) and EVA Air (長榮) plummeting on Friday, Wu said.
OUTLOOK
On the other hand, Wu said, China’s bright economic outlook for the year could give a boost to the local bourse.
World Expo 2010 Shanghai next month, the three-day Labor Day holiday and an appreciation of the yuan are factors that could boost the local market, Wu said.
Liu Kun-hsi (劉坤錫), president at Masterlink Securities Investment Advisory Corp (元富投顧), said that if the TAIEX failed to remain above its monthly moving average of 7,992 points, selling pressure could increase.
Since the volcano eruption and resulting ash cloud is triggering uncertainty, it will be difficult to estimate its effects, which will cast a shadow on stock markets around the world, he said.
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