Continued Losses Predicted For Taiwan Stocks

(RTTNews) - The losing streak has reached three sessions now for the Taiwan stock market, costing it more than 170 points or 7 percent along the way. The Taiwan Stock Exchange slid below support at 4,300 points on Wednesday, and now analysts say the market still has plenty of trading room to the downside on Thursday.

The Asian markets draw a broadly negative lead as investors continue their month-long fire sale on concerns of a deep global recession. A grim outlook for the U.S. auto sector added to the negative sentiment, as did additional pessimism from the release of the minutes from the most recent U.S. Federal Reserve meeting. The U.S. markets plummeted on Wednesday, and the Asian markets are also expected to see considerable weakness.

The TSE was modestly lower on Wednesday, as bargain hunting helped the market to recover from deeper losses in the morning session. The technology issues were down, as were the construction, paper, food and cement stocks. Bucking the trend, the financial and textile sectors posted modest gains.

For the day, the index lost 21.09 points or 0.49 percent to close at 4,284.09 after trading between 4,320.85 and 4,226.49 on turnover of 48.97 billion Taiwan dollars. There were 683 decliners and 617 gainers, with 372 stocks finishing unchanged.

Finishing higher on the day, Far Eastern Department Stores, Taishin Financial and Chi Mei Optoelectronics all were limit-up 7 percent, while Nanya Technology was 6.13 percent higher, Hon Hai rebounded 2.11 percent, Cathay Financial was up 2.56 percent and Chinatrust Financial was 1.94 percent higher.

The lead from Wall Street is brutal as stocks saw substantial weakness during trading on Wednesday, with the major averages moving sharply lower over the course of the session after initially showing a lack of direction. The weakness in the markets reflected concerns about the collapse of the nation's largest automakers as well as the possibility of deflation.

The worries about the outlook for automakers came as the CEOs of Ford (F | Quote | Chart | News | PowerRating), General Motors (GM | Quote | Chart | News | PowerRating) and Chrysler testified before the House Financial Services Committee, warning that bankruptcy for the nation's automakers would have devastating effects on the U.S. economy. While some Democrats in Congress have proposed that $25 billion of the $700 billion financial rescue package be given to the automakers, Republicans and the Bush administration largely oppose using any of the money for non-financial institutions and are encouraging seeking other sources of financing.

On the economic front, the Labor Department released its report on consumer prices before the opening bell, showing that prices fell 1.0 percent in October after coming in unchanged in September. The decrease marked the biggest monthly drop in prices on record. The report also showed that core consumer prices, which exclude food and energy costs, dropped 0.1 percent in October after rising 0.1 percent in the previous month. The drop in core prices, which came as a surprise to economists, marked the first decrease since 1982.

Separately, the Commerce Department said that housing stats fell to a record low annual rate of 791,000 in October from the revised September estimate of 828,000. Economists had expected starts to fall to 780,000 from the 817,000 originally reported for the previous month.

Additionally, the minutes of the October Federal Reserve meeting showed that the members of the Federal Open Market Committee lowered their outlooks for U.S. economic growth. The minutes also showed the FOMC members agreed that a significant easing in policy was warranted at the October meeting in light of the marked deterioration in the economic outlook and anticipated reduction in inflation pressures. Some members also suggested that additional policy easing could well be appropriate at future meetings, with all agreeing that the committee would take whatever steps were necessary to support the recovery of the economy.

The major averages accelerated to the downside going into the close of trading, ending the session at new five-year closing lows. The Dow closed down 427.47 points or 5.1 percent at 7,997.28, the Nasdaq closed down 96.85 points or 6.5 percent at 1,386.42 and the S&P 500 closed down 52.54 points or 6.1 percent at 806.58.

In economic news, Taiwan will on Thursday announce Q3 current account and GDP data. The current account is expected to come in at a surplus of $1.3 billion after a surplus of $6.493 billion in the second quarter. GDP is expected to increase 1.05 percent on year, down sharply from the 4.32 percent annual expansion in Q2.

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