Minister of Finance Su Jain-rong (蘇建榮) yesterday urged investors to remain calm, calling declines in the local bourse on Monday and yesterday a common period of consolidation following last month’s recurrent rallies to record highs on the back of an economic boom.
The TAIEX yesterday shed 288.57 points, or 1.68 percent, to 16,933.78 on an unprecedented turnover of NT$664.2 billion (US$23.762 billion) amid panic selling by day traders, analysts said.
The retreat came after a plunge of 344.31 points on Monday, taking cues from weaker activity on the Philadelphia Semiconductor Index and the NASDAQ Composite in the US, as well as additional locally transmitted COVID-19 infections.
However, yesterday’s selloff focused on non-tech stocks after the tech sector had been battered in the previous day’s session.
In the shipping sector, which dropped 8.48 percent, Evergreen Marine Corp (長榮海運) fell 10 percent to close at NT$78, Yang Ming Marine Transport Corp (陽明海運) fell 8.78 percent to close at NT$80 and Wan Hai Lines Ltd (萬海航運) declined 10 percent to close at NT$91.4.
The steel industry was also a target of the latest selloff, down 6.65 percent, with China Steel Corp (中鋼) down 5.97 percent to close at NT$36.25, Tung Ho Steel Enterprise Corp (東和鋼鐵) down 7.96 percent to close at NT$53.50 and Yieh Hsing Enterprise Co (燁興企業) down 10 percent to close at NT$14.50.
Su said that the corrections were technical consolidation often seen when share prices make record advances.
Investor skepticism had earlier mounted when the local bourse rallied toward 18,000 points on large daily turnover of about NT$500 billion.
Su hesitated to elaborate on TAIEX showings, but said that the recent weeks of rallies likely reflect the nation’s healthy economic fundamentals.
Exports, which account for 60 percent of GDP, remained in positive territory last month after putting up a stronger-than-expected performance last quarter, prompting upward revisions for the nation’s annual GDP growth this year, Su said.
The ministry is to disclose foreign trade data for last month on Friday.
Su said that he would discuss with the Financial Supervisory Commission whether it is wise to extend favorable tax rates to day traders.
Critics have said that day trading accounts for more than 30 percent of daily turnover and underpins drastic volatility, encouraged by favorable tax terms.
Hsieh Chin-ho (謝金河), chairman of the Chinese-language Wealth Magazine, has asked policymakers to consider withdrawing the day trading tax cuts, saying that continued favorable tax terms would make the government like casino operators who seek to inflate the state chest by turning the local bourse into a casino.
Contrary to popular opinion, foreign institutional players were not to blame for the slump as they increased holdings in local shares by net NT$88.85 million yesterday, Taiwan Stock Exchange data showed.
Mutual funds trimmed positions by net NT$2.28 billion, while proprietary traders cut another net NT$1.39 billion, exchange data showed.
Appreciation of the New Taiwan dollar to NT$27.952 against the US dollar in Taipei trading yesterday, from NT$27.979 on Monday, lent support to the selloff driven by day trading, analysts said.
Edward Chen (陳奕光), chairman at state-run First Capital Management Inc (第一金投顧), said that the corrections helped to reduce bubble pressure in the local bourse, which last month saw an increase in margin trading, which can lead to instability.
As long as the NT dollar holds steady and foreign players stay on board, the TAIEX would soon recover its growth momentum, Chen added.
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