Taiwan Market Due To Halt Skid

Wednesday, July 16, 2008; Posted: 08:25 PM

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(RTTNews) - The Taiwan stock market has finished lower every day this week, giving up more than 530 points or 7.37 percent in the process while falling to a fresh 21-month low. But analysts now say that the Taiwan Stock Exchange is likely to rebound sharply and follow the rest of the region to the upside when it kicks off trade on Thursday.

The forecast is broadly positive for the Asian bourses after unexpected good news from the U.S. financial sector in terms or quarterly earnings. Adding positive momentum was a significant pullback in the price of crude oil for the second consecutive day, which offset a report of higher than expected inflation in the U.S. - although the markets managed to finish substantially higher. Finally, many of the Asian markets are embroiled in sharp losing streaks and now warrant the attention of the bargain hunters.

The TSE was sharply lower again on Wednesday as tourism stocks were sold throughout the session. Construction stocks also were down, as were the transport, cement, paper, electronics and financials sectors.

For the day, the index lost 123.60 points or 1.81 percent to close at 6,710.64 for its lowest finish since it dipped to 6,681.09 in October 2006. The TSE traded between 6,867.73 and low of 6,708.46 and finished with turnover of 100.55 billion Taiwan dollars. There were 1,583 decliners and 453 gainers, with 448 stocks remaining unchanged. Among the decliners, EVA Air, Shin Kong Financial and Formosa International Hotels all were limit-down 7 percent, while Cathay Financial was down 6.30 percent and China Airlines fell 3.13 percent.

Bucking the trend, Yuanta Financial was up 1.21 percent, while Chinatrust Financial added 2.34 percent, TSMC was up 0.39 percent, MediaTek gained 3.07 percent and UMC was up 1 percent.

Wall Street finally provides a positive lead as stocks ended Wednesday's session with substantial gains, boosted by strength in the financial sector and a drop in oil prices. Considerable strength in the financial sector set the mood on Wall Street after Wells Fargo (WFC | Quote | Chart | News | PowerRating) reported better than expected quarterly results and increased its dividend by 10 percent. The positive news diminished some worries over the health of the sector. Analysts will be looking closely at the sector in the upcoming days as several financial institutions report their quarterly reports.

Investors were also cheered over a sharp sell off in oil prices following a surprise build in weekly crude supplies. Light sweet crude for August delivery closed at $134.60, down $4.14 for the session. Prices hit as low as $132.00 - oil's lowest mark since June 25 - following the report that crude oil inventories increased by 3.0 million barrels during the week ended July 11. Analysts were looking for a decline of about 2.5 million barrels. This was only the second increase in the last nine weeks.

In other news, the Federal Reserve had a clear concern about inflation and inflation expectations when it decided to leave interest rates unchanged in June, minutes of the policy meeting showed earlier in the afternoon. The minutes, which covered events at the June 24-25 FOMC meeting, will be scrutinized for signs of concern about the health of the financial markets and about the rising threat of inflation.

To underscore the point, the U.S. Labor Department revealed that its consumer price index climbed by 1.1 percent in June compared to the previous month. This represented a marked acceleration from May, when consumer prices were up 0.6 percent, and was the second fastest pace in 26 years. The core consumer inflation rate ticked up as well, topping the pace predicted by economists.

The major averages ended the day just off of their session highs. The Dow closed up 276.74 points or 2.5 percent at 11,239.28, the Nasdaq closed up 69.14 points or 3.1 percent at 2,284.85 and the S&P 500 closed up 30.45 points or 2.5 percent at 1,245.36.

In corporate news, EVA Airways Corp will issue 500 million new shares, the company said on Wednesday. Some 51.79 million shares will be reserved for employees while 50 million shares will be sold to the public. The remaining shares will be offered to existing shareholders on the basis of 101 new shares for every 1,000 shares held by them currently. Proceeds will be used for aircraft purchases, it said.

Also, Taiwan's self-sufficiency for flat panel display equipment has reached 41.4 percent, and the region is aiming to boost it to over 60 percent next year for a total production value of 73.5 billion Taiwan dollars, according to the Taiwan government's Industrial Development Bureau. As for components for FPD equipment, Taiwan's self-sufficiency has reached 50.9 percent, and its goal is to reach 80 percent in 2009 for a production value of over 20 billion Taiwan dollars, the bureau said.

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