The Taiwan stock exchange fell in tandem with markets across the region yesterday, shedding 150.89 points, or 3.2 percent, to close at a five-year low of 4,579.62, dragging down the local currency by another 0.4 percent to close at NT$33.41 against the greenback.
Analysts attributed the fall to panic selling by local and foreign investors as the financial woes plaguing US and European banks spread to emerging markets in Latin America and Asia.
Turnover was light at NT$25.67 billion (US$786 million), with foreign investors dumping a net NT$828 million in shares, Taiwan Stock Exchange (TWSE) data showed.
A total of 926 stocks, or more than 80 percent of the listed firms, dropped by the daily 3.25 percent limit.
Alan Tseng (曾炎裕), an analyst at Capital Securities Corp (群益證券), said the TAIEX would have taken a steeper plunge if the government had not halved the downside limit for securities.
But Tseng questioned the wisdom of the provisional measure, saying it could only delay rather than avert the slump.
“Because of the limit, many investors are unable to trade stock for cash,” Tseng said by telephone. “The restriction probably prompted foreign fund managers to sell South Korean shares and contributed to the sharp fall in the neighboring markets.”
The halved daily limit expired yesterday and financial authorities said they would decide whether to extend it on Sunday.
But Tseng said it was not necessary for the government to put on a facade of stability when global equity markets remained volatile because of the financial meltdown.
So far this week, the TAIEX had dropped 380.78 points or 7.7 percent, TWSE data showed.
Winson Wang (王榮旭), an analyst at Marbo Securities Consultant Co (萬寶證券投顧), agreed that halving the rate of decline had not helped shore up the local bourse, which tumbled yesterday in spite of a rebound on Wall Street overnight.
Wang said the stock market could witness even sharper falls once the government reinstates the 7 percent limit, but this could encourage more investors to enter the market and help digest the selling pressure.
“Many investors stayed away from the market in the last two weeks for fear of being trapped,” Wang said by telephone. “That is why trading was sluggish.”
The same worries gripping the TAIEX also dragged down the NT dollar, which has fallen 2.6 percent this week.
A trader at the Union Bank of Taiwan (聯邦銀行) described the local currency’s fall as “a crash with no end in sight.”
“The central bank apparently gave up intervening judging from the NT dollar’s drastic decline,” the dealer said by telephone.
“It could do little to counter world demand for US dollars anyway,” the dealer said.
Turnover reached US$1.113 billion on the Taipei Forex Inc yesterday.
Including the US$489 million turnover on the smaller Cosmos Foreign Exchange, total transactions reached US$1.602 billion, statistics from the two foreign exchanges showed.
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