The local stock market declined further to a five-month low yesterday as the government’s latest measures to prop up stock prices failed to arrest a slump in investor confidence amid escalating inflation fears.
Despite early gains, the benchmark TAIEX index dropped 0.33 percent, or 25.22 points, to 7,523.54 — the lowest since Jan. 31, when the bourse closed at 7,521 points. Turnover was 90.286 billion (US$2.97 billion).
“This tells us that the government’s measures have provided little support to the stock market. Investor confidence is collapsing because of rising worries about inflation following further oil price increases,” said Alex Huang (黃國偉), an assistant vice-president at Mega International Investment Services (兆豐國際投顧).
“We have begun seeing signs of panic sell-off in local shares,” Huang said.
On Saturday, the Cabinet said it had encouraged four major national funds and Taiwanese insurers — with a total of NT$8 trillion in capital — to buy local shares to help support stock prices.
“Local insurers invest to make profit. They will not cooperate with the government at the expense of their shareholders,” Huang said.
Seeing disappointing sales, Huang said local stock prices could drop to as low as 7,200 points in the next few trading sessions.
Defying the decline in the TAIEX yesterday, blue chips including chip designer MediaTek Inc (聯發科), flat-panel maker AU Optoelectronics Corp (友達光電) and handset maker High Tech Computer Corp (宏達電) climbed between 1.01 percent and 2.26 percent, ostensibly helped by the purchase of government funds, Huang said.
The government also encouraged local companies to buy back shares to prop up share prices after meeting overseas fund managers, brokerages, insurers and banks during the Saturday meeting.
Foreign fund managers sold an additional NT$1.19 billion net in local shares including Taiwan Semiconductor Manufacturing Co (台積電) and Shin Kong Financial Holding Co (新光金) yesterday, down sharply from net sales of NT$10.44 billion on Friday.
“The nation’s [economic] situation is not that bad,” said Andrew Teng (鄧安瀾), who tracks the local bourse for Taiwan International Securities Corp (金鼎證券).
“Local investors are worried about rising global oil prices and concerned about the US economy [and its potential impact on the Taiwanese economy],” Teng said.
As uncertainty about global macroeconomics should dissipate in the near future, investors should show patience, Teng said.
Teng was optimistic about the state of the local bourse in the next three to six months on the back of government efforts to spur the economy, including measures to facilitate economic ties with China.
Shares of the nation’s biggest memory chip packager, Powertech Technology Inc (力成), rose 1.91 percent after the company said it had signed a memorandum of understanding with Japanese chip company Tera Probe Inc to form a joint venture and gain a stronger foothold in the new logic chip packaging market.
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