More Losses Seen For Taiwan Stocks

(RTTNews) - After seeing its modest, two-day winning streak come to a halt on Monday, analysts are predicting that the losses will accelerate for the Taiwan stock market when the Taiwan Stock Exchange opens for business on Tuesday. The TSE is expected to follow the rest of the region to the downside, perhaps testing support at 7,000 points.

The global cues paint a grim picture for the Asian bourses on Tuesday as the financial stocks are expected to remain under heavy pressure on concerns about mortgage giants Fannie Mae and Freddie Mac - and the support plan from the U.S. Federal Reserve has done little to inspire confidence among investors, and the demise of IndyMac continues to have investors rattled. That was enough to pull U.S. stocks to the downside, and the Asian markets are predicted to do the same.

The TSE was sharply lower on Monday as the financial and electronics stocks were under heavy selling pressure throughout the session. The airlines also finished sharply lower, as did the transport, food, plastics and textile stocks. The losses were limited by strength from the tourism sector.

For the day, the index lost 87.80 points or 1.21 percent to close at 7,156.96 after trading between 7,270.49 and 7,140.47 on turnover of 94.87 billion Taiwan dollars. There were 1,309 decliners and 783 gainers, with 463 stocks remaining unchanged.

Among the decliners, China Airlines and EVA Air both were limit-down 7 percent, while Cathay Financial was down 4.39 percent, Shin Kong Financial was 2.55 percent lower, TSMC was down 2.88 percent and UMC lost 2.5 percent. Bucking the trend, Hon Hai was up 0.68 percent and Formosa International Hotels added 2.88 percent.

Wall Street provides more negative sentiment after stocks ended Monday's session with notable losses, in spite of the government's plan to help restore confidence in Fannie Mae (FNM | Quote | Chart | News | PowerRating) and Freddie Mac (FRE | Quote | Chart | News | PowerRating). Nonetheless, a selloff within regional banks put pressure on the markets.

Treasury Secretary Henry Paulson will seek approval to expand the government's line of credit to Fannie and Freddie, and allowing the Treasury to acquire equity capital in the companies, if necessary. Meanwhile, the Fed authorized the Federal Reserve Bank of New York to lend to the two GSEs, should the lending prove necessary, at the primary credit rate.

Financial markets were hammered last week amid speculation that Freddie Mac and Fannie Mae are on the verge of failing. While most of the focus is on the two mortgage giants, the markets were also hurt by news that IndyMac Bancorp (IMB | Quote | Chart | News | PowerRating), the holding company for IndyMac Bank FSB, was closed by the Office of Thrift Supervision after failing to raise capital.

Meanwhile, the tech-heavy Nasdaq saw significant weakness after Yahoo! (YHOO | Quote | Chart | News | PowerRating) rejected a restructured proposal from Microsoft (MSFT | Quote | Chart | News | PowerRating) and investor Carl Icahn. Last week, Microsoft said it would be open to discussing a "major transaction" with Yahoo! - including possibly a full acquisition - if Yahoo elects a new board at the Aug. 1 annual meeting. Shares of Yahoo! fell 4.2 percent.

While the major averages tried to stage a late day recovery, the averages could not sustain the upward move, falling lower in the last few minutes of the session. The Dow closed down 45.35 points or 0.4 percent at 11,055.19, the Nasdaq closed down 26.21 points or 1.2 percent at 2,212.87 and the S&P 500 closed down 11.19 points or 0.9 percent at 1,228.30.

In economic news, Taiwan's cabinet is expected this week to raise the mainland investment ceiling for Taiwan firms to 60 percent of net worth, from the current 20 to 40 percent, the Economic Daily News reported. Under the current rules, Taiwan firms with net worth of less than 5 billion Taiwan dollars can invest up to 40 percent of their net worth in China. Companies with net worth above 5 billion can invest 20 percent or 30 percent, depending on their size.

In corporate news, the Taiwan Fund, Inc. a net asset value per share of $19.40 for the quarter ending May 31. This represents an increase of $0.16 per share from the net asset value per share of $19.24 in the previous quarter. The Fund's share price, as traded on the New York Stock Exchange on May 31, 2008, was $18.40, which represents an increase of $0.82 per share from the share price of $17.58 on February 29, 2008. The Fund had a total return of 0.83 percent for the three months ended May 31, 2008 based on the change in its net asset value. For the same period, the Taiwan Stock Exchange Index had a total return of 4.15 percent.

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