Morgan Stanley Capital Intern-ational (MSCI) Inc is widely expected to raise its weighting of Taiwan's stock market today, a move which could help bring more foreign fund into Taiwan's equities market in the following months.
Despite the anticipated announcement, the Taiwan stock market did not receive a boost yesterday, analysts said.
The benchmark TAIEX slid 1.68 percent, or 95.06 points, to 5569.29 points on Wall Street's overnight weakness.
The revision of the weighting would mean that more money would flow into Taiwan from other markets, said Eric Lai (
Global research houses, including CLSA Ltd and Fidelity Investments, said that it is "highly possible" that MSCI would finalize its decision today and raise Taiwan's limited investment factor from 55 percent as of now to 75 percent in November.
"I don't see that the MSCI factor will prompt a massive inflow of foreign funds soon," said Wu Peiwei (
"If that were the case, foreign investors, sensitive to the market's ups-and-downs, would have snatched up local shares in advance. They are doing the opposite," Wu added.
The sell-off at the local bourse is part of foreign investors' broader plan of pulling out of Asian markets such as Taiwan and South Korea, as the US Federal Reserve is mulling raising key interest rates at a faster-than-expected pace, which could weaken Asian currencies and thereby make Asian shares expensive, Wu said.
Over the past week, overseas fund managers -- who hold about one?fifth of Taiwanese stocks -- sold a net NT$13.15 billion, unloading about NT$7.22 billon worth of local shares yesterday.
"I don't think they will divert their investments back to Asia soon, though we did see the capital outflow slow slightly recently, compared to the peak in April," Wu said.
Bill Lan (
"We can't really count on them for a rally in the near term," Lan said. "The positive effect will not surface until late November, or early December, after MSCI's new policy takes effect."
Heavyweights -- chipmaker Taiwan Semiconductor Manufacturing Co, Cathay Financial Holding Co and flat-screen maker Chi Mei Optoelectronics Corp -- are likely to benefit the most from the MSCI move such as , he added.
MSCI earlier this year started consultations on whether to grant Taiwan a greater representation, but disappointed investors in early March by keeping the market's weighting unchanged.
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