Taiwan Market May Extend Decline

(RTTNews) - The Taiwan stock market has finished lower in two of the last three sessions, sinking in the process to a four-year closing low. The outlook for the Taiwan Stock Exchange doesn't look any better on Tuesday as analysts suggest that the market will fall through support at 5,500 points and possibly 5,400 points as well.

The Asian markets draw a dismal global forecast as markets around the world have been in free fall for the last two sessions over rapidly growing concerns over a world-wide recession. With investors around the world gripped by fear and panic that the credit crisis is spreading - in spite of measures by a host of central banks to allay their fears - the Asian markets are forecast to fall hard again on Tuesday.

The TSE finished sharply lower on Monday, with the financial stocks getting hammered across the board to lead the charge to the downside. Construction stocks also were sharply lower, as were textiles, electronics, paper and cement stocks.

For the day, the index lost 236.53 points or 4.12 percent to close at 5,505.70 after trading between 5,505.70 and 5,590.52 on turnover of 60.21 billion Taiwan dollars. There were 1,486 decliners and 208 gainers, with 280 stocks finishing unchanged.

Among the decliners, Cathay Financial, Shin Kong Financial, Chinatrust Financial, HTC and chip designer MediaTek all were limit-down 7 percent, while TSMC gave up 4.67 percent and UMC held steady.

Wall Street provides another sharply negative lead as stocks ended Monday's session sharply lower, amid worries that the government's $700 billion bailout plan won't stop a global economic slowdown. The Dow closed down more than 350 points, ending the day below the psychologically important 10,000 mark.

With investors unconvinced about the effectiveness of the bailout, President George W. Bush warned Monday that it would take time for the government's $700 billion financial rescue package to have an impact.

Meanwhile, the government has initiated steps to help inject liquidity into the credit markets. Earlier in the day, the Federal Reserve revealed the latest in a series of steps taken to help keep credit markets functioning while stress on global markets intensifies. The Fed announced that it is increasing the size of the Term Auction Facility auctions by up to $150 billion for both the 28 and 84-day auctions.

The U.S. central bank is also offering banks interest on their reserves, which allows the Federal Reserve to continue supplying money while maintaining the federal funds rate near its target, not allowing it to go much lower.

Nonetheless, the credit crisis seems to be spreading to Europe. The European Central Bank, the Bank of England and the Swiss National Bank attempted to boost the markets Monday by offering over $60 billion to dried-up credit lines. This is in addition to $50 billion the ECB offered in overnight liquidity and $10 billion the BoE added.

While the major averages attempted a recovery in the final hour of the session, they still ended the session sharply lower. The Dow set a three-year closing low and the Nasdaq and the S&P 500 set four-year closing lows. The Dow closed down 369.88 points or 3.6 percent at 9,955.50, the Nasdaq closed down 83.12 points or 4.3 percent at 1,864.27 and the S&P 500 closed down 42.34 points or 3.9 percent at 1,056.89.

In economic news, Taiwan will on Tuesday announce September numbers for imports, exports and trade balance. Imports are expected higher by 22.8 percent on year, down from the 39.9 percent annual expansion in August. Exports are called higher by 14.5 percent on year after an 18.4 percent annual expansion in the previous month. The trade balance is expected to reflect a surplus of $2.1 billion after a $30 million shortfall a month earlier.

Also, Taiwan's annual inflation slowed to 3.09 percent in September from August's 4.67 percent due to a fall in prices of vegetables, the Directorate General of Budget, Accounting and Statistics said on Monday, slowing for the second straight month. The core inflation that excludes fruits, vegetables, fish, shellfish and energy stood at 3.25 percent.

On a monthly basis, the consumer price index declined 0.60 percent in September, mainly due to decrease in prices of fuels and lubricants, vegetables and meat. The core CPI fell 0.13 percent. For the first nine months of 2008, the CPI increased 4.10 percent over the same period of previous year.

At the same time, the statistical office reported that the wholesale price index rose 6.64 percent in September from the previous year. On-month, the WPI fell 1.42 percent.

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