The TAIEX closed down 0.12 percent yesterday to 9,701.07, following a large turnover of NT$140.39 billion (US$4.55 billion), as investors trimmed positions on local shares to reflect downgrades in quarterly Morgan Stanley Capital International (MSCI) indices, analysts said.
The global stock index provider cut Taiwan’s weighting in the Emerging Markets Index from 12.15 percent to 12 percent and the weighting in the Asia ex-Japan Index from 14.49 percent to 14.27 percent.
However, MSCI left Taiwan’s weighting in its All-Country World Index unchanged at 1.31 percent.
The market is likely to turn cautious next week with the expansion of the daily stock trading limit from 7 percent to 10 percent on June 1, state-run Hua Nan Securities Co (華南永昌投顧) chairman David Chu (儲祥生) said.
“Investors, especially non-institutional ones, might need time to adapt to the change and could refrain from active trading in the first few sessions of next week,” Chu said by telephone.
Many investors would consider it prudent to stay on the sidelines while the impact of the regulatory easing takes shape, Chu said.
Altogether, the main trading index shed 118.98 points this month, or 1.21 percent, as the market responded to the economic slowdown at home and abroad and assimilated their impacts on shares, Chu said.
Foreign institutional players cut holdings in local shares by a net NT$300.4 million yesterday, while proprietary traders and mutual funds shrank their positions by net NT$1.68 billion and NT$178.18 million respectively, Taiwan Stock Exchange data showed.
However, foreign funds increased total stakes by a net NT$31.43 billion this month, indicating they remain positive about local shares, Chu said.
“The sentiment should lend support to the TAIEX, which might consolidate in the near term with a positive bias,” Chu said.
Masterlink Securities Investment Advisory Corp (元富投顧) president Liu Kun-hsi (劉坤錫) said the daily trading fluctuation limit should be deemed as a neutral move that would not sway the market in any particular direction.
“Corporate earnings results are what really affects share prices,” Liu said by telephone.
Heavyweight technology companies are scheduled to hold shareholders meetings next month and might share their business outlooks then, Liu said.
The upcoming annual Computex tech fair in Taipei might see the launch of new technology, Liu said adding that he had failed to spot any new products that might serve as market catalysts so far.
Information from Wall Street over the weekend would also affect the performance of the local bourse next week and there are no major downside risks on the horizon, Liu said.
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