The nation's main index closed below the psychologically important 8,000 level yesterday, hurt by eroding confidence in the new government.
The TAIEX dropped 163.81 points yesterday, or 2 percent, closing at 7,900.39. Since reaching a high of 10,393.59 on Feb. 17, the index has fallen 23 percent.
Shares fell after Minister of Finance Shea Jia-dong (
In addition, analysts said the Pachang Creek (
"Investors have lost their confidence in the stock market," said Huang Guo-wei (
"The reason the TAIEX has dropped below 8,000 is not because of the international economic environment or tension across the Strait," Huang said. "The main reason is that investors have lost confidence. They are skeptical about the competency of the new administration."
President Chen Shui-bian (陳水扁) spent nearly an hour alone yesterday with Liu Tai-ying (劉泰英), former chairman of the KMT's Business Management Committee and head of the party's stock trading. Though no one knows what was discussed, market watchers said the pair probably talked about how to revive shares.
Ministry of Finance officials suggested that the four government funds could step up intervention efforts by investing a greater portion of the fund's assets in equities.
"US pension funds have devoted as much as 68 percent of their portfolio to stocks, much higher than the 30 percent of the four government funds," said Yen Ching-chang (顏慶章), deputy minister of finance.
"It is a world trend to increase the amount of government funds in the stock market. Currently, the remaining amount available for the four government funds to put into stocks is NT$145 billion. It is a powerful tool that investors should not neglect."
Yen said he has already forwarded the idea to the Executive Yuan.
Analysts say the market is likely to consolidate until China's Beidaihe (
With cross-strait political tensions and worries on the homefront, "foreign investors have decided to take profits for now," said Henry Cheng (
Cheng added that outward displays of friendliness between China and Russia and the Korean peace talks have changed the strategic situation in East Asia, possibly affecting Taiwan.
"Therefore, the outcome of China's decision toward Taiwan next month is vital. For now, most expect China will continue its current policy. But if China changes its policy adversely, that would have a devastating effect on the Taiwan stock market."
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