Taiwan Fin Min: Stk Move Up Limit Unchanged At 7.0%
TAIPEI (Dow Jones)--The lower limit on individual stock price movement will be cut to 3.5% from 7.0% beginning Monday and will be effective for two weeks, said Taiwan's Finance Minister Paul Chiu on Sunday.
The upper limit will remain at 7.0%, while the lower limit will apply to stocks on the main board, over-the-counter market and futures, said Chiu.
In addition, the steering committee of the stock stabilization fund will meet an hour before trading begins Monday morning to determine if the fund should enter the market, said Chiu.
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Taiwan Fin Mkts Set For Bumpy Ride After Chen Victory
TAIPEI (Dow Jones)--Taiwan's financial markets are set for a bumpy ride Monday following a watershed victory by opposition candidate Chen Shui-bian in presidential elections over the weekend, but analysts believe stability should return by week's end.
"The stock market will probably tank on Monday, but bounce back by Friday," said Peter Tsao, head of Asian technology research at ING Barings. "The smart money will step in and start buying on Tuesday."
The island's currency, the New Taiwan dollar, is also likely to come under pressure, although the central bank is expected to continue to intervene aggressively to keep the market stable.
Some traders said they expected the island's main stock index to plunge 7% Monday - the stock exchange's limit for intraday moves - and lose as much as 10% during the week from Friday's close at 8763.27 points.
But they added that buying by government linked funds will cushion the fall, and eventually pull the market back from the lows.
"The market should touch (the 7% down limit), but whether it closes there depends on the government funds," said Bruce Richardson, head of research at WI Carr Securities in Taipei.
Chen's victory on Saturday brought an end to more than half a century of Nationalist Party, or KMT, rule on the island.
But Chen's Democratic Progressive Party espouses eventual independence from mainland China, and the market fears his victory could trigger an angry reaction from Beijing.
Last week, Chinese Premier Zhu Rongji warned that war could ensue if a new government in Taiwan tried to declare independence. The statement spooked investors and forced Taiwan's government to pour an estimated NT$100 billion (US$=NT$30.77) into the market to restore stability.
Traders said government funds would again be key to the market's performance this week, and some took comfort from the outgoing government's assurances that it will maintain order. On Saturday, Finance Minister Paul Chiu pledged to "maintain stability in the stock and foreign exchange markets" until Chen is inaugurated May 20.
He added that the government's four large funds will continue to be active in the market on Monday.
But others doubted the outgoing government's commitment to keeping markets stable, given their lame-duck status.
"What does (the government) care - they lost," said one dealer, who asked not to be named. - China Reaction Is Key -
Analysts say much will also depend on the reaction from mainland China over coming days. Beijing regards Taiwan as a renegade province that must be brought back into the fold, by force if necessary.
"There will be strong selling pressure tomorrow, but the timing and severity of that drop will be a function of whether the government funds choose to buy and how Beijing adjusts to Chen," said Richardson. "If (Beijing) starts to sabre-rattle, that'll scare off a lot of people."
So far, mainland China's response has been calm. On Saturday, Beijing said it would watch to see how Chen handles cross-straits relations and reiterated its one-China policy. There was none of the bellicose rhetoric that had been coming out of Beijing in the run-up to the elections.
All of which suggests that any market turbulence over coming days could be short-lived, analysts say. And they add that Taiwan's economic outlook is so strong that fundamentals should quickly start driving the index higher, analysts said.
Taiwan's exports are expected to surge 10.4% in 2000, while GDP is set to grow 6.5%, compared with 5.67% last year. Much of that growth is derived from the island's technology companies, which are key suppliers to computer industry giants overseas. - Central Bank Seen Supporting NT$ -
Meanwhile, the island's currency, the New Taiwan dollar, will likely come under pressure as demand for the U.S. dollar increases amid concerns about mainland China's reaction to Chen's victory. The U.S. currency finished at NT$30.766 on Friday, up from Thursday's close of NT$30.756.
While few people believe cross-straits tensions could lead to military conflict, many may prefer to play it safe and convert part of their savings into U.S. dollars, dealers said.
But central bank intervention in the foreign exchange market will likely cushion any falls, dealers say. The central bank aggressively defended the local currency last week, selling around US$1.2 billion over the course of five sessions, according to dealers.
Likewise, money market rates should rise as liquidity tightens on worries about mainland China's next steps, but dealers say an abundance of funds in the market - the result of recent central bank intervention in the forex market and a steady stream of maturing certificates of deposit and negotiable CDs - will likely keep any fluctuations limited.
On Friday, the overnight interbank rate was at 4.621%, compared with 4.618% during the previous session.
In addition, yields on government bonds will likely also rise as players stay sidelined on political concerns, dealers said, while noting that reaction to political uncertainty last week was limited. |
