WEEKAHEAD-Taiwan stocks brace for quake aftershock
07:26 a.m. Sep 26, 1999 Eastern
By Joyce Liu
TAIPEI, Sept 26 (Reuters) - Taiwan's stock market was expected to fall when it opens on Monday for the first time since Tuesday's earthquake, but fund managers said they were waiting to buy at the lows, shrugging off fears of a plunge.
``It's likely to fall sharply on Monday. Apart from the earthquake, the market hasn't reflected the weakness on Wall Street,' said Ben Chen, chief investment officer of Hung Tai Capital Management.
The stock market has been closed since Tuesday's earthquake, which registered 7.6 on the open-ended Richter scale, killed about 2,000 people and caused billions of dollars of damage.
On Friday, the Dow fell 0.38 percent to 10,279.33, bringing the Wall Street benchmark's weekly loss to 524.30 points.
``Taiwan's economy, fundamentals and semiconductor industry outlook are still all considered good in the long term, so it will be a good time to buy after the falls,' Chen said.
``Maybe a good 10-15 percent fall, but that's about it.'
Analysts said semiconductor, electronic and insurance shares would be among the hardest hit, while firms related to post-quake rebuilding such as construction, steel and cement would benefit.
To avoid panic-selling, Taiwan on Sunday ordered a temporary narrowing of the trading volatility limits in its stock and futures markets so that no stock's price can fall more than 3.5 percent in a single day.
The new restrictions, also applied to Over-the-Counter Exchange and the futures-trading Taiwan International Mercantile Exchange, apply only to price declines. The upward volatility limit remains unchanged at seven percent.
The narrowed limit will remain until October 8.
SOUND FUNDAMENTALS TO PROVIDE SUPPORT
The medium-term impact from the quake should be limited,
thanks to the same strong fundamentals that helped Taiwan
resist the worst of the Asian crisis, analysts said.
Booming exports prompted the government to lift its 1999
growth estimate to 5.74 percent from 5.1 percent, but the
quake forced Taiwan to cut the revised forecast to 5.5 percent.
Officials said a post-quake reconstruction boom should drive
growth beyond six percent in 2000.
LONG-TERM DAMAGE UNLIKELY FOR FOUNDRY,
DRAM MAKERS
Preliminary state estimates showed at least 188 out of 455
listed firms had been affected, projected sales losses totalling
T$5.86 billion ($184 million) and T$1.19 billion in assets lost.
The figures were likely to rise as many companies had yet to
report their losses to the stock exchange.
Manufacturers in Taiwan's 16 industrial zones had reported a
total loss of T$1.37 billion. Operations in Hsinchu Science
Park, the heart of Taiwan's lucrative semiconductor industry,
ground to a halt for four days due to power cuts and
aftershocks.
Taiwan supplies 10 percent of global semiconductors and about
70 percent of global supplies of made-to-order ``foundry'
chips, which make up eight percent of global electronics output.
Insurance shares were seen vulnerable. The industry typically
expects a bill equivalent to about 30 percent of total economic
losses, which government leaders said could top T$100 billion.
CONSTRUCTION, CEMENT TO GAIN
Analysts said sectors expected to benefit from the disaster
included cement, steel and construction, which are related to
post-quake rebuilding.
``I am a bit conservative about construction shares. People will
be extremely cautious in the future about companies with bad
reputations from now on,' said Michael On, president of
Beyond Asset Management.
``However, at least those shares will resist major falls.'
Taiwan has launched an official investigation into possible faulty
construction following the earthquake.
W.I. Carr Securities recommanded Asia Cement, Taiwan
Cement
and China Steel. It maintained a buy for Taiwan Semiconductor
Manufacturing Co and expected Fubon and Cathay Life to
weaken.
************
Intel, Other Tech Stocks, Fall On Taiwan Worries
12:25 a.m. Sep 26, 1999 Eastern
SAN FRANCISCO (Reuters) - The shares of Intel Corp. and some other chip makers tumbled Friday, as Wall Street analysts began warning this week's earthquake in Taiwan could have a worse-than-expected impact on the fourth quarter.
Tuesday, a massive earthquake that registered 7.6 on the Richter scale hit Taiwan, killing more than 2,100 people, toppling buildings, cutting power to most of the island -- and halting operations at Taiwan's semiconductor plants.
Taiwan supplies 10 percent of global chip demand and is also home to the industry's largest foundry, Taiwan Semiconductor Manufacturing Co., which manufactures chips for many of the world's semiconductor sellers.
``People were being strangely complacent about Taiwan. The
estimates for the impact were absurdly low,' said Drew Peck, an analyst at SG Cowen & Co. ``Three weeks of production (will be lost), when capacity is already tight. Chip sets are largely sourced out of Taiwan and that will be a major restraining force on PC sales in the fourth quarter.'
The shares of Intel -- which supplies over 80 percent of the microprocesssors to PC makers -- tumbled $1.83 to close at $75.67 and the company was the most actively traded stock on Nasdaq.
Thursday, Peck told his sales force that he planned to cut his earnings estimates on Intel, but he was waiting for more data on the production slowdown in Taiwan.
``PCs are going to be hit hard,' Peck said, adding that most of the motherboards, graphics chips and chip sets that are standard in PCs are made in Taiwan.
Analysts said shortages of these parts will ultimately hurt personal computer makers and they will face component shortages in the fourth quarter, which is typically the industry's most important period.
``Taiwan's earthquake could have an impact on fourth quarter PC shipments,' said Richard Gardner, a Salomon Smith Barney analyst, in a note to clients. ``In our view, final assembly operations will bounce back fairly quickly once electricity is restored. We are therefore more concerned about potential semiconductor shortages,' he added, particularly shortages of memory chips, graphics chips and other customized specialty chips.
Gardner said Taiwan supplies 55 percent of the world's motherboards, the main boards that hold all the chips in PCs; 11-12 percent of the world's memory chips; and more than 80 percent of the world's graphics chips.
Friday, BancBoston Robertson Stephens analyst Dan Niles added to the pressure on Intel, saying Intel has had some order cancellations in the current third quarter due to weaker-than-expected PC demand.
``We also expect that the potential delay of DRAM components and motherboards coming from Taiwan could cause problems as we ramp toward Christmas,' Niles said.
He added that even a one-week delay can be critical.
The shares of many other chip makers and some chip equipment makers, which supply equipment to the semiconductor industry, were off. Rambus Inc., developer of a technology for creating faster memory chips, tumbled $16.38 to $71.13. Applied Materials Inc., the biggest maker of chip equipment, was flat, closing at $78.88. |
