Taiwan regulators look for slide tonight
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Mon, 20 Mar 2000, 6:01am HKT
Taiwan Cuts Daily Down Limit For Stocks by Half, to 3.5%, to Avert Slide
By Brett Cole
Taiwan Cuts Daily Stock Limit by Half, to 3.5% (Update1)
(Updates with confirmation by stock exchange, outlook for
market, stock picks by investors.)
Taipei, March 19 (Bloomberg) -- Taiwan cut the daily down
limit on stocks by half, to 3.5 percent, to head off a slide when
the market reopens tomorrow for the first time since a landmark
presidential election.
The Finance Ministry said the new limit will begin tomorrow
and last until April 1, the Taiwan Stock Exchange said in a
statement. The 7 percent up limit will remain in place.
Saturday's upset victory by opposition candidate Chen Shui-
bian unseated the Nationalist party, which had ruled Taiwan for
more than 50 years. Chen's victory sparked concern that the
island's fragile relationship with China will suffer because he is
considered pro-independence by the Beijing leadership.
Taiwan last altered its daily trading limit last September,
after a powerful earthquake rocked the island. At the time, the
limit was also cut by half, to 3.5 percent, and lasted two weeks.
The benchmark index slumped 14 percent during the month
leading up to the election.
Prior to the government announcement, many investors had
expected stocks to slide tomorrow, though they said declines could
be limited because China has so far issued only a muted reaction
to a candidate its top leadership had derided as unacceptably pro-
independence.
TSMC, Winbond
Chipmakers such as Taiwan Semiconductor Manufacturing Co. and
Winbond Electronics Co. could benefit most as global growth in the
computing industry offsets lingering concern about China-Taiwan
relations.
``I don't think anyone would differ on the view that there'll
be selling pressure and the likelihood is that we will see the
market go down,' said Peter Kurz, director of Merrill Lynch
Taiwan Ltd.
Taiwan's key TWSE index fell 7 percent last week alone,
thought it's still up 60 percent in 12 months, as China stepped up
its war of words with Taiwan. Chinese Premier Zhu Rongji said
``whoever pursues Taiwan independence will not end up well.'
So far, however, China's reaction to Chen's victory has been
restrained. `We are willing to exchange views on cross-Straits
relations and peaceful reunification with all parties,
organizations, and personalities in Taiwan who endorse the `One
China' principle,' the government said in a statement.
``I don't expect the Taiwan market to fall much further,'
said Aaron Pong, who helps manage $200 million in equities in
Asian excluding Japan at RBC Investment Management (Asia) Ltd. in
Hong Kong. ``The Taiwan market could rise given that China's
response was relatively mild and encouraging' to Chen's victory,
he said, also before the new limits were announced.
Chen, a former Taipei city mayor and candidate of the
opposition Democratic Progressive Party, won 39.3 percent of the
vote, topping independent candidate James Soong's 36.8 percent and
Nationalist candidate Lien Chan's 23.1 percent. The election drew
83 percent of the island's 15.5 million registered voters.
Caution
TSMC, Winbond and Macronix International Co. were among the
top picks by John Brebeck, a strategist at Jardine Fleming Taiwan
Securities Ltd.
``We see tremendous value in the index,' said Brebeck, who
expects the index to rise as high as 12,800 by the end of the
year, up 46 percent from its close Friday.
Brebeck said his picks ``will benefit from what we see to be
two to three years of strong earnings growth,' Brebeck said.
``Hon Hai and Compal we like as companies which are converting
their revenue base from predominately personal computer related to
telecom and networking related.'
Still, many investors said caution is warranted this week.
Chen has yet to fully explain his economic policies, beyond saying
he would seek to break the cozy ties that have long existed
between the Nationalist, or Kuomintang, party and big business in
Taiwan.
``I expect further losses as the market tries to digest the
implications of the election of a new president,' said Thomas
Murphy, who helps manage $600 million in investments in Asian and
Australian stocks at BNP Investment Management (Australia) Ltd. in
Sydney.
Pong who forecasts the index will rise to 10,000 by year-end
is buying chip-makers such as such as TSMC, saying earnings per
share growth this year could be as high as 25 percent.
``The market is discounting a more serious response from
China on the election of Chen Shui-bian than there was,' Pong
said. ``The index could go higher as long as independence does not
become a national stance of the Democratic Progressive Party or
Chen.' |
