The TAIEX shed 2.4 percent, or 169.12 points, yesterday, closing at 6,877.12 points, below the psychologically critical 7,000 mark, as more foreign funds pulled out of the local market and domestic investors cut holdings on deepening worries of a Greek default.
Shares tumbled in line with losses across Asia, although Wall Street staged a modest rebound over the weekend, heightening a bearish sentiment that might drag the benchmark index lower in the near term, analysts said.
“Following the collapse of the 7,000-point defense, the market is now looking for the next support at 6,500 points,” Schroders Investment Management Taiwan vice president Tony Chen (陳同力) said by telephone.
This estimate could prove overoptimistic if Europe’s debt woes spread to Spain, Italy or other countries, triggering more massive selloffs, Chen said.
Ke Meng-cong (柯孟聰), a market analyst and vice president of SinoPac Securities Co (永豐金證券), said widespread investor panic was the reason behind the regional market plunge, and Taiwan is no exception.
However, because the local bourse has been dipping for eight months since this year’s high of 9,220 points on Feb. 8, a rebound is likely to come in the near term and investors should consider bottom fishing for long-term holdings, Ke said by telephone.
Yesterday’s turnover eased to NT$106.31 billion (US$3.38 billion), from NT$130 billion on Friday, with foreign institutional players trimming a net NT$3.15 billion in local shares, while proprietary dealers reduced a net NT$1 billion, Taiwan Stock Exchange (TWSE) data showed.
Foreign funds have cut a net US$2.84 billion in local shares this month, raising net sales to US$105.85 billion so far this year, according to TWSE statistics. Chen linked the capital movements partly to tightening liquidity in Europe, where banks are under pressure to shore up capital both to meet new accounting requirements and to prove financial health in the wake of credit downgrades.
Societe Generale, France’s second-largest listed bank, said on Friday in Taipei that it was financially strong, but would embark on leverage and cost reductions in the next few years to maintain its healthy credit profile.
Godwin Chang (張建西), chief country officer of Societe Generale’s Taipei branch, said its French headquarters is asking the Hong Kong branch to help raise funds, but operations here will remain unaffected because of limits on corporate and investment banking services.
Shares in Fubon Financial Holding Co (富邦金控), Taiwan’s second-largest financial services provider by assets, plunged 6.39 percent to NT$30.05 as the conglomerate struggles to emerge from a sports lottery scandal plaguing its subsidiary Taiwan Sport Lottery Corp (運彩), said Winson Wang (王榮旭), an analyst at Marbo Securities Consultant Co (萬寶證券投顧).
To calm jittery investors, Premier Wu Den-yih (吳敦義) said yesterday at the Legislative Yuan that the country’s GDP would continue to grow at 4.8 percent this year, despite the recent debt crisis in Europe and the weak economic recovery in the US.
However, the main bourse is set to usher in volatility in the near term despite its strong fundamentals, said James Yeh (葉鴻儒), an analyst at JPMorgan Asset Management Taiwan (摩根富林明投信).
“Taiwan is closely tied to international [market] movements and the key now lies in the resolution of eurozone debts and the US passage of a bill to spur employment,” he said in a note yesterday.
Additional reporting by Jason Tan
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