Local investors are bracing for a sharp market downturn today as the nation’s financial markets resume trading following a two-day closure for national holidays before the weekend, with sentiment rattled by US President Donald Trump’s sweeping tariff announcement.
Trump’s unveiling of new “reciprocal tariffs” on Wednesday triggered a sell-off in global markets, with the FTSE Taiwan Index Futures — a benchmark for Taiwanese equities traded in Singapore — tumbling 9.2 percent over the past two sessions.
Meanwhile, the American depositary receipts (ADRs) of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most heavily weighted stock on the TAIEX, plunged 13.8 percent in New York between Thursday and Friday.
Photo: RITCHIE B. TONGO, EPA-EFE
On Wall Street, the Dow Jones Industrial Average slid 9.3 percent, while the S&P 500 shed 10.5 percent over the two sessions. At the same time, the Philadelphia Semiconductor Index plummeted 16.7 percent, and the tech-heavy NASDAQ dropped 11.5 percent.
Given the close correlation between Taiwan’s electronics-heavy market and movements in US tech stocks, analysts warned that a drop of similar magnitude in the local equities could put the TAIEX into technical correction territory.
The TAIEX closed 0.08 percent higher at 21,298.22 on Wednesday ahead of the extended holiday weekend. The benchmark index is down 7.54 percent since the beginning of this year.
For comparison, the benchmark index on Aug. 5 last year plunged an unprecedented 1,807.21 points, or 8.35 percent, to 19,830.88 on fears of economic weakness in the US and heightened geopolitical tensions, Taiwan Stock Exchange data showed.
“I think we could see the TAIEX first move back to the 20,000 level, or fall below 20,000 and fluctuate at the lower level seen in August last year,” Taishin Securities Investment Advisory Co (台新投顧) analyst Tony Huang (黃文清) said.
“The market had already reacted to the tariff issue before, but it’s just that the tariff rate of 32 percent on Taiwan is far higher than the previous assumption of 20 to 25 percent,” cable TV station USTV quoted Huang as saying yesterday.
“I think government funds, including the National Stabilization Fund [NSF, 國安基金], will take measures to stabilize the market,” he said.
The NT$500 billion (US$15.1 billion) NSF’s steering committee is scheduled to hold its regular meeting on Monday next week.
However, the committee could move to activate the fund in response to market turbulence, as permitted under Article 8 of the National Stabilization Fund Act (國家金融安定基金設置及管理條例). The clause allows intervention if major domestic or international events trigger large movements of international funds, significantly affect public confidence or lead to disorder in the capital market and financial market in Taiwan.
Whether the fund would be activated tomorrow to help stabilize the market remains uncertain, as it would depend on the extent of market volatility and the fund’s steering committee operates under the jurisdiction of the Ministry of Finance.
Premier Cho Jung-tai (卓榮泰) yesterday convened an emergency meeting with Financial Supervisory Commission Chairman Peng Jin-lung (彭金隆) and Taiwan Stock Exchange chairman Sherman Lin (林修銘) to discuss contingency plans in the event of a crisis.
President Capital Management Co (統一投顧) chairman Li Fang-kuo (黎方國) yesterday urged investors to remain calm and patient, saying the situation is more stable than the market panic seen during the COVID-19 outbreak in 2020.
“There are signals the stock market will stabilize: a reduction in margin loans, the shrinkage of trading volume and no further fall in the TAIEX despite negative news,” USTV quoted Li as saying.
“These three signals can help investors judge if the market has bottomed out,” he said.
“Nevertheless, don’t try to predict the low point of the index at this time,” he added.
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