Wall Street drop could affect local index: expert
January 27, 2014, 12:26 am TWN
TAIPEI -- Investors are expected to watch the Taiwan Stock Exchange Weighted Index (TWSE) closely today to see whether it can withstand a possible ripple effect from Wall Street to maintain its record of nearly always ending in positive territory in the last session before the Lunar New Year.
The Dow Jones industrial average Friday fell 318.24 points, or nearly 2.0 percent, to 15,879, ending the week down 3.5 percent and following a 217-point loss a day earlier.
The tumble on Wall Street is due to concerns that the Federal Reserve's next move could have an impact on the week's only trading session in the local stock exchange, said Chen Wei-ren, a manager of the Allianz Global Investors Taiwan Technology Fund.
Both domestic and foreign investors showed signs of caution last week, he said. The TWSE index registered a weekly rise of 0.03 percent at Friday's close at 8598.31.
Chen noted the events to watch before trading resumes Feb. 5 after the holiday, including a meeting of the Fed's Federal Open Market Committee Jan. 30 and China's latest purchasing managers index, expected Feb. 1.
Both government policies and continued recovery in the global economy bode well for the local stock market in the long and medium terms, said Beven Yeh, a manager of the Prudential Financial High Growth Fund.
He warned, however, that the TWSE index has risen to a relative high, so that the possibility of a correction after its recent peak cannot be ruled out.
If that happens, Yeh added, domestic investors seeking to benefit from a drop in share prices could intervene and provide support to the stock market.
Buying could come from government funds in order to keep the index in the black, as has been the case in recent days, said an observer.
Often with some help from the government, the TWSE index has nearly always gone up on the last trading session before the Lunar New Year, seen as an auspicious sign.
The last time the index fell at the close before a Lunar New Year was on Jan. 22, 1998, when it fell 13.18 points to close at 8085.47.
This year, the Chinese New Year begins Jan. 31.