Taiwan Stocks Could Ease Further

(RTTNews) - The Taiwan stock market continues to alternate between positive and negative finishes while trending steadily to the downside en route to a five-year closing low. Now after Wednesday's sharply lower finish, analysts expect the Taiwan Stock Exchange to move into the red once again on Thursday.

The global forecast remains ominous as stock markets around the world continue to plummet on growing fears of a worldwide recession. Extreme volatility has marked this week's action, with markets usually ending sharply lower - and that trend is expected to continue on Thursday. Investors in the U.S. shrugged off a coordinated interest rate cut and some mildly optimistic economic data, instead embarking on a selling frenzy that sent shares plunging - and the Asian bourses could follow the same path.

The TSE finished sharply lower on Wednesday, dragged to the downside by heavy selling among the financial and construction sectors - while the construction, cement, textile, paper, food and plastics stocks also saw significant declines.

For the day, the index lost 318.26 points or 5.76 percent to close at the daily low of 5,206.40 after peaking at 5411.72 on turnover of 66.76 billion Taiwan dollars. There were 1,541 decliners and 137 gainers, with 238 stocks finishing unchanged.

Among the decliners, United Microelectronics, Taiwan Semiconductor Manufacturing Co, Mega Financial and Taishin Financial all were limit-down 7 percent, while MediaTek was down 6.69 percent, Smartphone maker HTC was down 1.81 percent, Taiwan Mobile was down 1.35 percent and China Steel was down 6.45 percent.

Wall Street ended a volatile session sharply lower on Wednesday, as investors digested an emergency rate cut by the Federal Reserve in a combined effort from several other central banks. While the cut spurred some buying interest throughout the session, concerns remain about the health of the global economy.

Stepping up already intense efforts to protect the global economy from the crisis afflicting the financial markets, six of the world's most influential central banks announced Wednesday that they were conducting a coordinated reduction in interest rates. The largest coordinated central bank action in history involved the central banks in the U.S., Canada, the Euro-zone, the UK, Switzerland and Sweden, each of which lowered its benchmark interest rate by half a percentage point.

In the U.S., the Federal Reserve cut its benchmark interest rate to 1.5 percent - its lowest level since the summer of 2004. The move came well before the Fed's regular-scheduled meeting on interest rates - set to take place near the end of the month. Ben Bernanke, chairman of the central bank, hinted on Tuesday that a rate cut could come in the near future.

The action represented a new level of cooperation between central banks, which up until now have changed interest rates based on the needs of their individual economies. Many of the central banks have acted together in the past to provide liquidity for markets, but Wednesday's announcement was the first time such a large group of major central banks enacted a coordinated rate change.

Meanwhile, pending home sales unexpectedly showed a substantial increase in the month of August, according to a report released by the National Association of Realtors on Wednesday, with the pending home sales index rising to its highest level in over a year.

Alcoa (AA | Quote | Chart | News | PowerRating) unofficially kicked off earnings season after the markets closed on Tuesday. The aluminum producer reported disappointing quarterly results, raising concerns about the upcoming season. Wal-Mart Stores (WMT | Quote | Chart | News | PowerRating) reported September same store sales that came in line with analysts' expectations, while Bank of America (BAC | Quote | Chart | News | PowerRating) priced its offering of $10 billion, or 455 million shares, of common stock.

The major averages saw notable selling pressure in late day trading, with each setting five-year closing lows. The Dow closed down 189.01 points or 2 percent at 9,258.10, the Nasdaq closed down 14.55 points or 0.8 percent at 1,740.33 and the S&P 500 closed down 11.29 points or 1.1 percent at 984.94.

In economic news, the Taiwan central bank lowered one-year lending rate by 0.27 percentage points to 6.93 percent from 7.2 percent, effective Thursday. The central bank also reduced the reserve requirement ratio by 0.5 percentage points, which will come into effect from October 15.

On the corporate front, United Microelectronics Corp saw sales fall 23.6 percent on year in September, the company said on Wednesday, standing at 8.052 billion Taiwan dollars versus 10.542 billion Taiwan dollars a year earlier. UMC posted sales of 8.165 billion Taiwan dollars in August.

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