Taiwan stock market down 153.0 on MSCI weights

By Sandra Chuang, The China Post

Taiwan stock market yesterday breached 5,000 points and the local currency dropped to below the NT$33 level against one U.S. dollar after the MSCI announced its provisional index series in line with its new weighting system.

The index fell 153.06 points, or 3 percent, to close at 4,958.61, with the daily turnover shrinking to NT$40.9 billion, down from last Friday’s NT$46.8 billion. The market slipped 31.95 points at the opening and fell sharply below 5,000 points within one hour mainly due to MSCI’s disappointing changes, which were based on a free float market weighting system.

After dropping over 2 percent, the market sustained a relatively mild downturn in the middle trading session, but was dragged down again as heavy selling pressure emerged in later trading, after a reported proposal by the Taiwan Research Institute that the local currency be allowed to depreciate dramatically to NT$40 to the U.S. dollar. Technology shares were hammered hardest, mainly because the new weighting is lower than previously expected. Taiwan Semiconductor Manufacturing Corp. shed 2.2 percent to close at NT$88.5 and United Microelectronics Corp. falling 1.9 percent to NT5$1.1.

Financial shares also moved downward on the announcement of sharp rise in Q1 average overdue loan ratios by the Central Bank of China. In particular, United World Chinese Commercial Bank declined 3 percent on a report that the bank might plan to choose either the Lin-Yuan Group or Fubon Group as a partner to jointly form a holding company.