Local bourse under pressure amid capital gains tax woes


TAIPEI — The local bourse came under pressure yesterday as concerns over a proposed capital gains tax on stock investments continued weighing on market sentiment, dealers said.

Fears over a slowing economy in the United States and lingering debt problems in the eurozone also cast shadows over the local stock market throughout the trading session, they said.

Local firms which are in the Apple global supply chain encountered heavy selling after shares of the U.S. consumer electronics giant fell more than 3 percent on Wall Street overnight, they added.

The weighted index closed down 115.54 points or 1.51 percent at 7,507.15, after moving between 7,507.15 and 7,605.22, on turnover of NT$79.07 billion (US$2.68 billion).

The market opened down 0.30 percent as investors witnessed losses posted on Wall Street, in particular the falling tech-heavy NASDAQ index, overnight after Washington reported mixed economic data, dealers said.

Selling in local shares escalated to push the index even lower by the end of the session as the capital gains tax worries imposed further impact on the market movement, they said. “Amid weak market confidence, investors scrambled to dump large cap high-tech stocks in a bid to avoid further losses as a result of the capital gains tax worries,” Mirae Asset Management analyst Arch Shih said.

The Cabinet said Thursday it will send a capital gains tax proposal by the Ministry of Finance to the Legislative Yuan in two weeks for approval.

“Before the tax bill is finalized on the parliamentary floor, the market is still full of uncertainty, which is the last thing investors like,” Shih said. “Now, select high-tech stocks, especially Apple concept stocks, have become good targets for investors to sell after recent gains.”

Among the stocks in the Apple supply chain, metal casing maker Catcher Technology fell 7 percent, the maximum daily decline, to close at NT$185.00 amid speculation that the company may lose orders from Apple as the U.S. firm will use liquid metal casings, instead of aluminum and magnesium housings the Taiwanese company provides, for the new version of iPhone.

Touch panel manufacturer TPK also fell 7 percent to end at NT$388.00, and Hon Hai Precision, which assembles iPhone and iPad, ended down 2.37 percent at NT$103.00.

“I do not expect the local bourse will make any immediate turnaround amid current fragile sentiment which has prevented bargain hunters from picking up stocks at lows,” Shih said.

At the end of the session, the machinery and electronics sector suffered the heaviest losses among the eight largest sectors of the market, finishing down 1.8 percent, led by Apple concept stocks.

Elsewhere, financials shed 1.3 percent, the paper and pulp, and construction sectors fell 1.2 percent, cement stocks shed 1.1 percent, plastics and chemicals lost 1.0 percent, textiles dropped 0.8 percent, and the foodstuffs sector closed down 0.6 percent.

Gold Circuit Electronics, a printed circuit-board maker, closed down 7 percent at NT$6.53 after a fire broke out in its plant located in Changshu of China’s Jiangsu Province, disrupting production there.