Stock decline to accelerate, say analysts
The heavy losses suffered by U.S. stock markets last week are expected to accelerate the fall on Taiwan’s markets, local analysts said yesterday.
The weighted index of the Taiwan Stock Exchange ( TWSE) had shed 3.02 percent on Friday before the U.S. stock markets experienced one of their worst falls in recent years on the last day of their trading week on growing concerns about the health of the Chinese mainland’s economy.
The Dow Jones Industrial Average closed down 10.1 percent from its May record, registering its fourth consecutive day of declines with a loss of 530.94 points, or 3.1 percent, to finish at 16,459.75.
The S&P 500 and the Nasdaq Composite Index both posted sharp declines of 3.19 percent and 3.52 percent respectively.
The dismal performances in the U.S. stock market are heaping extra pressure on the TWSE, which has already lost more than 2,000 points in recent weeks from its peak of the year at almost 10,000 points.
Liu Kun-hsi, president of the Masterlink Securities Investment Advisory Corp., said the weakening mainland Chinese economy has already resulted in reduced orders for Taiwan-based firms that rely on the Chinese market, the impact of which has been reflected by the falling prices on the local markets.
The China woes have now extended their impact to major stock markets in the world, creating more pressure on the local markets, he said.
Chen Kuan-sheng, an analyst from the Caizi School, predicts the U.S. stock markets will continue falling and will fall to their lowest by the end of August. The Taiwan stock markets will do the same soon after, he said.
He said some possible developments — such as mergers and acquisitions, proposed revisions to the stock transaction tax, and the depreciation of the New Tai- wan dollar — may provide momentum for a rebound.
Chip packaging house Advanced Semiconductor Engineering on Friday announced a bid to take over local competitor Siliconware Precision Industries. Analysts said it seems a good time for acquisitions when stock prices are low.
Lee Chi-hsien, president of the over-the-counter GreTai Securities Market, also agreed that the local bourses will soon hit bottom. He attributed the recent declines to a lack of confidence, maintaining that the fundamentals remain sound.
Lee said the companies trading on GreTai generally posted significant results for the first half of the year. Although the growth momentum for them is slowing down, these firms still stand a chance of registering growth in the second half, he added.
Hsieh Chin- ho, chairman of the Wealth Magazine, said Taiwan is facing one of its worstever economic disasters.