Local bourse takes late dive amid debt concerns

The China Post news staff and CNA

Early gains in the local bourse were erased yesterday, sending the index into negative territory at the end of the session as doubts resurfaced over the European debt situation, dealers said.

Optimism that European leaders would come up with concrete measures in their ongoing informal talks to deal with their debt problems has receded, prompting investors to lock in profits after the bourse rebounded mildly in morning trading, dealers said.

The weighted index closed down 22.86 points or 0.31 percent at 7,124.89, after moving between 7,090.47 and 7,190.55. Turnover totaled NT$64.24 billion during the session. The market opened up 0.21 percent and moved to the day’s high on a technical rebound from a 1.74-percent plunge in the previous session. Profit taking followed, wiping out the early gains as sentiment toward the European financial situation remained cautious, dealers said.

It is believed, however, that after the index fell below the 7,100-point mark, government-run funds intervened to prevent further losses on the broader market by the end of the session, they said.

“The Greece problem continues to dictate the movement of the markets at home and abroad,” said Horizon Securities analyst Benson Huang. “Without any breakthrough in the European financial crisis, it is not easy for the local bourse to get out of the current doldrums.” According to brokers, continued selling has resulted in a drastic reduction in total margin account balances. If the downward trend continues, brokers will be forced to either make margin calls asking investors to add more money to their margin accounts, or sell their holdings on their behalf, the brokers said. At the end of the session, the paper and pulp sector suffered the heaviest losses among the eight largest sectors of the market, finishing down 1.26 percent. Construction stocks lost 1.19 percent, textiles shed 0.82 percent, foodstuffs fell 0.78 percent, and financials closed down 0.75 percent.

Plastics and chemicals fell 0.46 percent, and machinery and electronics lost 0.18 percent, while the cement sector closed up 0.17 percent.

Bucking the downside of the broader market, Taiwan Semiconductor Manufacturing Co. closed up 1.90 percent at NT$80.60 on buying from government-run funds.