The TAIEX yesterday slumped 2.96 percent, or 274.05 points, to 8,976.11 as disappointing export data, the spillover effect of falling Chinese equities and Greece’s debt problems triggered panic selling, driving the index down at the fastest pace in nearly four years, analysts and government officials said.
It is the first time the benchmark index has tumbled below the 9,000-point mark this year, with turnover surging to NT$141.79 billion (US$4.54 billion), compared with NT$90.98 billion on Tuesday, Taiwan Stock Exchange (TWSE) data showed.
The growing volatility in local shares does not yet warrant a government intervention, but the National Stabilization Fund (國安基金) is to discuss the market’s performance at its quarterly meeting on Monday, Vice Minister of Finance Wu Tang-chieh (吳當傑) said.
Photo: AFP
Financial Supervisory Commission Chairman William Tseng (曾銘宗) attributed yesterday's plunge to a myriad of complications including the Greek debt crisis, declining June export figures, reduced GDP forecast and continued slide in Chinese shares, that sent exchange-traded funds (ETF) that tracks Chinese shares tumbling.
Tseng said that while Taiwan has relatively low exposure to the situation in Greece, misgivings among investors were exacerbated by the addition of discouraging domestic factors such as lagging exports and dismal GDP growth prospects.
"The commission is monitoring the situation," he added.
The local bourse has shed 10.36 percent since briefly hitting 10,014 on April 28, with NT$2.9 trillion worth of capitalization vanished, or losses of NT$305,000 per investor, according to TWSE data.
“The panic selling reflects a confidence shift on the part of both domestic and international players, and the grim sentiment is likely to remain for a while,” said David Chu (儲祥生), chairman of state-run Hua Nan Securities Co (華南永昌投顧).
Foreign institutional investors cut positions by a net NT$15.41 billion, a pace rarely seen these days, while mutual funds and proprietary dealers slashed holdings by net NT$1.01 billion and NT$474.89 million respectively, according to TWSE statistics.
Exports, which account for 70 percent of Taiwan’s GDP, contracted by 13.9 percent last month from a year earlier, raising fears the economy might not be able to hold up in the second half of the year, Standard Chartered Bank said.
In addition, Greece’s debt crisis might drag economic recovery in Europe, with Taiwanese shipments to the region falling 9.8 percent.
Weakened confidence swept across major bourses in the region, with shares in China and Hong Kong plunging deeper.
China, in particular, has seen an influx of global funds seeking to capitalize on earlier rallies, but many have been trapped amid ongoing market corrections there, Chu said.
Some investors might pull funds from the local bourse to meet cash needs across the Taiwan Strait, adding more pressure to local stock market, he said.
Wu, who oversees the National Stabilization Fund, said that there was no need yet for government intervention.
With NT$500 billion in capital, the state fund was created to prop up local shares to prevent systemic failure and in times of drastic volatility caused by non-economic factors.
“The situation does not yet meet the criteria for intervention,” Wu told reporters.
However, the fund is to talk about changes in the local bourse over the past two weeks, during its routine meeting on Monday, he said.
The large trading volume on the local market reflects a growing interest in bargain shares, or transactions would have remained sluggish, he said.
He denied asking state-run financial institutions to buy shares, saying he trusted their own professional judgement.
Taiwan Stock Exchange (TWSE) chairman Lee Sush-der (李述德) advised investors to remain cautious in face of rising volatility.
As bearish sentiments grow in the market, the TWSE may decrease the number of initial public offering (IPO) deals on the main bourse for this year, he added.
Additional reporting by Ted Chen
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