Tue, Mar 17, 2020 page12

• TAIEX falls below 10,000 amid rate cuts

  FED EFFECT: An analyst said that a US rate cut was to soothe market sentiment, but anxiety was the result, as it indicated that the situation was worse than expected

  • By Kao Shih-ching / Staff reporter
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  The TAIEX yesterday closed below 10,000 points for the first time in 13 months, plunging 20 percent from its peak in January, reflecting rising concerns over the COVID-19 pandemic, which has prompted several central banks to announce interest rate cuts.

  The index dove 4.06 percent to close at 9,717.77, the first time it has closed below 10,000 points since it closed at 9,932 on Jan. 30 last year, Taiwan Stock Exchange data showed.

  Turnover on the main board was NT$209.379 billion (US$6.93 billion), with foreign institutional investors selling a net NT$33.35 billion in local shares, the data showed.

  

  A computer screen displays a graph of TAIEX transaction volume at a stockbroker in Taipei yesterday.

  Photo: CNA

  Analysts attributed the decline to investor concerns over the US Federal Reserve on Sunday slashing rates by a full percentage point, four times its usual range.

  “Theoretically, the rate cut should have soothed market sentiment, but it instead it made investors feel anxious and presume that the situation was so bad that the Fed needed to conduct a larger-than-expected reduction,” Capital Investment Trust Corp (群益投信) fund manager Daniel Tsai (蔡彥正) told the Taipei Times by telephone.

  Investors had also turned conservative over Taiwanese companies after Apple Inc delayed the release of its 5G iPhone due to the pandemic, with the delay to weaken momentum for the nation’s iPhone suppliers, while plummeting crude oil prices weigh on local petrochemical firms, Tsai said.

  Smartphone camera lens maker Largan Precision Co’s (大立光) shares dipped 8.25 percent to NT$3,725, while shares of Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker, sank 4.69 percent to NT$71.1 on the Taiwan Stock Exchange.

  Formosa Petrochemical Corp (台塑石化) shares dropped 3.98 percent to NT$70 and Formosa Plastics Corp (台灣塑膠) declined 2.98 percent to NT$78.2.

  The TAIEX has dropped significantly from its 30-year high of 12,179 points on Jan. 14, which is an omen that should not be ignored, analysts said.

  “Although a drop of 20 percent or more is usually considered a sign of the market turning bearish, we need to wait to see if Taiwan’s equity market has ended a bull run,” Hua Nan Securities Investment Management Co (華南投顧) chairman David Chu (儲祥生) said by telephone.

  “Bearish or not, you can say that the local market is going through a difficult time. Global and domestic consumption would be weakened by the continued spread of the virus, travel bans and the cancelation of sports events,” Chu said.

  Even with Taiwan’s central bank expected to cut interest rates at its quarterly board meeting on Thursday, it is not likely to boost the TAIEX much, as people would not increase their investments or consumption just because of a rate cut, he said.

  “People are eager to know when the outbreak would be contained, but a rate cut will not provide an answer,” Chu said.
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