Lingering tax concerns reverse early gains


TAIPEI — Lingering concerns over a possible capital gains tax on stock investments continued to weigh on the local bourse yesterday, with the index reversing an early trade upside to close in negative territory, dealers said.

Selling focused on high-tech stocks, in particular the firms in Apple Inc.’s supply chain, which were boosted by the U.S. consumer electronics giant’s strong first-quarter results as investors rushed to pocket profits, the dealers said.

The weighted index closed down 41.83 points, or 0.55 percent, at 7,521.35, after fluctuating between 7,509.88 and 7,600.45, on turnover of NT$68.78 billion.

The market opened up 0.49 percent and moved to the day’s high on Wall Street gains overnight that resulted from rising expectations that the U.S. Federal Reserve will launch more liquidity-easing measures to boost the economy, the dealers said.

However, after the index breached the 7,600-point mark, profit-taking set in as worries over the capital gains tax returned to haunt investors, which dragged down the broader market into the red, they said.

“Looking at the thin turnover, many investors remained reluctant to chase prices after the market opened higher on the lead of Wall Street,” said Concord Securities analyst Kerry Huang.

“Amid the lingering concerns over the capital gains tax, investors tended to lock in their profits soon after the index moved up,” Huang said, adding that “high-tech stocks were targeted for profit-taking during most of the trading session.”

Among the large-cap electronics stocks, Hon Hai Precision, which assembles iPhones and iPads for Apple, fell 1.89 percent to close at NT$104.00, while smartphone maker HTC shed 3.72 percent to end at NT$453.00.

TPK, a touch panel supplier for Apple, closed down 1.30 percent at NT$380, reversing earlier gains, after the company issued cautious sales guidance for the second quarter of this year.

The Cabinet has completed a review of the capital gains tax proposal by the Ministry of Finance after making some changes, including a hike in the deductible amount on net gains for retail investors to NT$4 million from the originally proposed NT$3 million.

The proposal still needs approval from the Legislative Yuan before it can be implemented.

“Many investors expect that the tax proposal will trigger strong debate on the legislative floor,” Huang said. “Until the tax is approved by lawmakers, the market will remain full of uncertainty.”

Huang said that as many investors are preferring to stay on the sidelines due to the tax concerns, it is unlikely that the market will get out of the current consolidation mode in the near future.

At the end of the session, the machinery and electronics sector suffered the heaviest losses among the eight major stock categories, finishing down 1.1 percent. Paper and pulp stocks and financial issues both fell 0.3 percent, cement shares lost 0.2 percent and textiles closed down 0.1 percent.

Bucking the decline on the broader market, however, foodstuffs rose 0.5 percent, and plastics and chemicals gained 0.2 percent, while the construction sector closed unchanged.