Taipei shares close lower as currency fall outweighs MSCI changes

TAIPEI (AFX-ASIA) - Share prices closed lower, falling below the psychologically important 5,000 points level, in lacklustre trade as weakness in the local currency outweighed changes announced by Morgan Stanley Capital International in its provisional index series, dealers said.

	    The Taiwan dollar failed to hold at 33.000 against the U.S. dollar, even after the Taiwan Research Institute had rejected a weekend report that it made a proposal to Vice President Annette Lu for the government to allow the Taiwan dollar to depreciate to 38.00 or even 40.00/usd to stimulate the economy.

	    The MSCI announcement had a limited impact since it was largely in line with expectations, dealers said.

	    In the announcement, Taiwan's weighting in the Emerging Markets Free Index was increased by 0.73 percentage points while in the All Country World Free Index it was reduced by 0.25 points, with the number of constituents increased to 91 companies from 63, dealers said.

	    The weighted index closed down 153.06 points or 2.99 pct at 4,958.61, off a low of 4,902.22. 

	    Volume was 1.35 bln shares worth 40.96 bln twd. 

	    Decliners led risers 496 to 41, with 46 stocks unchanged. 

	    Two stocks closed limit-up and 132 limit-down.

	    The cement, paper, electronics, construction, financials, food, petrochemicals and textiles sectors were down 3.75 pct, 3.75 pct, 3.55 pct, 3.39 pct, 2.76 pct, 2.09 pct, 0.44 pct and 0.34 pct.

	    The Taiwan dollar was at 33.381 against the U.S. dollar, from its previous close of 32.948.

	    "A reported proposal from a research institute was powerful enough to knock down the local unit, showing how fragile sentiment is towards the financial markets," Truswell Securities Investment assistant vice president Michael Hsu said.

	    The MSCI announcement did not produce any positive impact on the bourse, confirming the cautious tone in the run-up to the year-end parliamentary elections amid lingering economic concerns, he said.

	    Softening fundamentals could be behind the absence of position-building in new MSCI constituents, while the same weakness in fundamentals added to selling pressure on those companies that were deleted or which had their weightings reduced, he said.

	    Investors were disappointed that the government failed to provide any concrete measures on the political and economic front to mark the celebration of the anniversary of its inauguration, he said. 

	    Meanwhile, the Ministry of Finance this morning indicated its readiness to implement countermeasures against "irrationality" in the financial markets, but this failed to give sentiment much of a boost, Hsu said. 

	    "Investors were sidelined, (as is) evident from the thin trade, not pinning much hope on there being any strong government support."

	    The crucial issue facing the bourse is the performance of the economy, he said.

	    "I would expect an 'L'-shaped move in the industry and the market in the current quarter. A 'U'-shaped development seems to be impossible," he added.

	    Downside risk, however, should be limited following a correction of more than 1,000 points.

	    "The magnitude of a further correction should be limited but the duration of the correction may be extended."

	    TSMC lost 2.00 twd to 88.50 on news its weighting in the MSCI EMFI is to be reduced to 14.52 pct from 19.87 pct. Cathay Life Insurance fell 0.50 to 44.70 with its weighting cut to 3.06 pct from 4.89 pct, and China Development Bank lost 1.50 to 26.40, with its weighting to be cut to 1.75 pct from 3.52 pct.

	    Among the 33 new MSCI constituents, Compeq lost 4.50 twd to 94.00, VIA Technologies fell 15.00 to 273.00, Macronix shed 2.80 to 40.00, Accton added 0.30 to 36.10, Acer CM fell 2.20 to 36.50, Bank SinoPac rose 0.30 to 15.80, CMC Magnetics fell 2.30 to 36.60, President Chain rose 3.00 to 78.00 and China Airlines dropped 0.50 to 17.00.

	    Chunghwa Telecom was limit-down 4.50 at 63.00 on disappointment that it was not included in the new MSCI indices.

	    Taiwan Pulp was down 0.11 at 3.65, Chung Hwa Pulp unchanged at 9.00, and Lien Hua flat at 7.25, Federal Corp down 0.45 at 7.80 and Ever Fortune limit-down 0.14 at 1.86 after they were dropped from the MSCI indices.

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