Finance, petrochemical stocks hit as bourse falls
CNA June 23, 2012, 12:14 am TWN
TAIPEI -- The local bourse suffered extended losses yesterday as investors remained cautious about the global economy after international crude oil prices fell below US$80 per barrel for the first time since early October on weakening demand, dealers said.
While large-cap petrochemical stocks encountered heavy selling amid concerns over their profitability on the falling oil prices, the financial sector came under pressure after Moody's downgraded its credit ratings of 15 financial institutions around the world, they said.
The weighted index closed down 57.00 points, or 0.78 percent, at 7,222.05, after moving between 7,185.31 and 7,229.73 on turnover of NT$56.17 billion.
The market opened down 1.19 percent in reflection of a plunge on Wall Street overnight on continued concerns over the world's economic fundamentals after Washington released lower-than expected home sales data for May, the dealers said.
In addition, the HSBC Manufacturing Purchasing Managers' Index showed further weakening manufacturing activity in China, which dampened market sentiment toward the global economy. This downward sentiment, in turn, helped send oil prices into a tailspin, they said.
However, after the index fell below 7,200 points, bargain hunting emerged to help the broader market recover part of its earlier losses by the end of the trading session, they added.
"The weakness of the global economy remained the top concern among many investors at home and abroad," Mega Securities analyst Alex Huang said, referring to losses incurred by other regional markets, including Hong Kong and Seoul.
Huang said the falling manufacturing activity in China, which is the second-largest economy in the world, has raised concerns over its fundamentals after the U.S. Federal Reserve a day earlier cut its forecast for the U.S. economy, the world's biggest.
"Without any signs of an immediate rebound in economic activity worldwide, I do not think the local bourse will be able to rebound any time soon," Huang said.
"As many investors prefer to stay on the sidelines, waiting for more clues about the economy, turnover is expected to remain thin in the near term, which will make it difficult for the stock market to jump over the stiff hurdles ahead of 7,400 points," he said.
Affected by the falling oil prices, Formosa Plastics fell 3.13 percent to close at NT$77.30, while Nan Ya Plastics lost 1.96 percent to close at NT$55.00.
After Moody's downgrades of 15 financial institutions, including Bank of America, Goldman Sachs and JPMorgan, Cathay Financial closed down 1.36 percent at NT$29.00 and Chinatrust Financial ended down 2.01 percent at NT$17.05.
At the end of the session, the plastics and chemicals sector suffered the heaviest selling among the eight major sectors of the market, finishing down 1.83 percent. Cement stocks fell 1.33 percent, financials shed 0.94 percent and foodstuffs closed down 0.92 percent.
Textiles shed 0.70 percent, machinery and electronics lost 0.44 percent, and paper and pulp stocks fell 0.11 percent, while the construction sector closed up 0.71 percent.
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