The TAIEX yesterday retreated 5.83 percent to close at 8,681.34 points, the lowest in 42 months, as foreign and domestic institutional investors continue a sell-off amid the escalating worldwide spread of COVID-19, analysts said.
The benchmark index opened down 133.39 points at 9,085.28 — which was lower than the 10-year moving average of 9,110 points — and continued falling by a total of 695 points in the early morning session, before slowly rebounding to close down 537.33 points at the end of trading, Taiwan Stock Exchange (TWSE) data showed.
The TAIEX has fallen 28 percent from its peak of 12,179 points, registered on Jan. 14, a considerable and rarely seen drop, but analysts said that they could not predict the bottom for the market, given the ongoing spread of the coronavirus.
Photo: Liao Chen-huei, Taipei Times
“The deterioration in the local equity market could be attributed to sell-offs by foreign and domestic institutional investors. There will likely be a turning point once they stop selling, but it is hard to forecast when,” Capital Investment Trust Corp (群益投信) fund manager Daniel Tsai (蔡彥正) told the Taipei Times by telephone yesterday.
“Cash is king now. Institutional investors would prefer to decrease their holdings of risky assets, as they predict their value to decline amid volatile trading,” Tsai said.
Besides taking the “flight-to-quality” action, some institutional investors sold local shares after a computer-activated trading tool unleashed stop-loss orders when prices of stocks they bought earlier had declined more than 30 percent, Tsai said.
As the New Taiwan dollar yesterday weakened against the US dollar, it seemed that some foreign investors immediately moved funds out of Taiwan after selling local equities, partially to support their fund management businesses, he said.
Foreign institution investors yesterday sold a net NT$21.22 billion (US$695.6 million) of local shares, slightly down from the average of NT$28 billion they sold over the previous three days.
It would still take days to observe if the sell-offs would ease, he said.
Domestic securities investment trust companies also sold a net of NT$700 million of local shares, up from the previous three day’s average of NT$209 million, TWSE data showed.
“Quantitative easing monetary policy, rate cuts and expansionary fiscal policy would be a bit helpful, but not very likely to alter the trend. People do not lack funds, but they need to see effective treatments for COVID-19 before regaining confidence in the global economy,” Tsai said.
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