Taiwan’s stocks slumped to a five-month low and the local currency weakened as concerns that some European nations will struggle to finance widening budget deficits eroded investor appetite for emerging-market assets.
The TAIEX dropped 4.29 percent to 7,217.83, its biggest decline since January last year, and the NT dollar slid 0.5 percent to this year’s low of NT$32.187 versus the US dollar.
Taiwan’s financial markets are open today to make up for a lost trading day during the Lunar New Year holiday.
“Taiwan shares always fall the most in the region when there’s a global meltdown,” said Eric Chou, who helps manage around US$1.8 billion at Jih Sun Securities Investment Trust Co (日盛投信). “We have more institutional investors and they tend to panic easily over news.”
At the opening of the trading session, the TAIEX lost 218.88 points, dropping to 7,323.16, and fluctuated between a high of 7,352.98 and a low of 7,196.39 during the day’s trading.
A total of 4.61 billion shares changed hands on market turnover of NT$121.69 billion (US$3.80 billion).
All eight major stock categories lost ground, with construction stocks dropping the steepest, 6.2 percent.
The sharp plunge in such shares was attributed partly to a ruling by the Ministry of Economic Affairs earlier in the week that canceled six items on Pacific Distribution Investment Co’s (太平洋流通) business registration, including three capital increases on behalf of the Far Eastern Group (遠東集團).
The ministry’s ruling cast doubts on Far Eastern Group’s control over the popular Pacific Sogo Department Stores Co (太平洋崇光百貨).
The ruling sent Far Eastern Group shares into a downward spiral over several sessions.
The Chinese-language Commercial Times cited Lee Chi-hsien (李啟賢), director-general of the Securities and Futures Bureau at the Financial Supervisory Commission, as saying the regulator may suspend trading in shares of the group’s three companies pending a clarification regarding the Sogo investment.
The companies have been given a week to explain their investment in Sogo, the newspaper report said.
Far Eastern Department Stores Ltd (遠東百貨) slid by the 7 percent daily limit to NT$24.75, the lowest since May. Far Eastern New Century Corp (遠東新世紀) slumped 6.9 percent to NT$30.95, the steepest slide since December 2008, and Asia Cement Corp (亞泥) dropped 6.9 percent to NT$28.3.
Chou said investors may also be reducing stock holdings before the week-long Lunar New Year holiday that begins on Feb. 14.
“We have the longest Chinese New Year holiday in the region, so investors are concerned about any changes that may happen during the break,” he said.
Altogether, the three major institutional investors made net sales of NT$19.83 billion in shares yesterday, with NT$15.72 billion sold by foreign investors, NT$1.83 billion by investment trust firms and NT$2.29 billion by securities firms.
Meanwhile, the NT dollar is “relatively stable,” the nation’s central bank said in a faxed statement yesterday, after the local currency fell to its lowest since Dec. 30.
All of Asia’s 10 most-used currencies excluding the yen declined versus the greenback.
“US dollar strength will continue into next week because of the debt crisis in Europe,” said Henry Lin, a currency trader at Shin Kong Commercial Bank (新光商業銀行).
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