Taiwan stock index posts strong rebound, soars 6.64%

Asian Economic News, Oct 23, 2000

TAIPEI, Oct. 20 Kyodo

Taiwan stock prices soared 6.64% Friday, boosted by massive gains of technology stocks in New York and six market-boosting Taiwan government measures announced Thursday.

The Taiwan Stock Exchange Weighted Index (TAIEX) opened some 150 points higher on the back of the third-largest gain in the technology-heavy Nasdaq composite index in New York.

Led by electronics stocks, the index continued its powerful rally to close near the day's high at 5,404.78, up 323.50 points or 6.64%. The index moved between the opening low and a 5,407.06 high.

The gains almost erased Thursday's steep losses, which had left the TAIEX at a four-and-a-half year low, and eased selling pressure on investors who bought stock on margin as well as banks that hold stock as collateral.

If the market had gone further down Friday, margin calls worth up to NT$40 billion might have been executed, analysts said.

This month alone the index has dropped more than 20% amid concern slowing demand for personal computers will slow earnings in the electronics industry, which is a cornerstone of Taiwan's economy.

Such concerns were eased by better-than-expected earnings reports Thursday for several U.S. electronics firms who are clients of local electronics companies as well as for the island's made-to-order chipmaker Taiwan Semiconductor Manufacturing Co.

Turnover rose markedly to NT$65.814 billion from the dismal NT$37.519 billion posted Thursday. However, trading slowed down considerably after the first hour of trading as hundreds of stocks were temporarily suspended from trading after hitting their daily upward 7% limit.

A total of 2,068,479 lots of 1,000 shares each were traded compared with 1,540,622 lots Thursday. Market analysts attributed the rally mainly to the gains in the U.S. markets, saying the government measures will have only limited effect on generally weak market sentiment.

On Thursday, Finance Minister Yen Ching-chang announced several short-term measures, which he said aimed to ease selling pressure in the market.

They included narrowing the daily limit-down to 3.5% from 7% from Friday through Nov. 7 and prohibiting short-selling if a stock price drops below the NT$10 face value.

To boost buying demand, the government eased restrictions on foreign ownership in local companies. Foreign investors may now buy up to 75% of a single company's stock instead of just 50% before.