After halting on Monday the five-day losing streak that cost it more than 738.83 points or 10.5 percent while setting a fresh two-year low in the process, the Taiwan stock market headed right back to the downside again on Tuesday. Now investors are bracing for another day of trading firmly in the red when the Taiwan Stock Exchange kicks off trade on Wednesday - likely giving up support at 6,400 points.
The market earns a gloomy global forecast as bad news about Lehman Brothers is expected to weigh heavily on financial stocks around the world. Weak housing data out of the United States adds to the negative sentiment, while the banks are forecast to pull their respective markets sharply lower on Wednesday.
The TSE finished sharply lower on Tuesday, near the daily low as investors cashed in on the 5-plus percent gain in the previous session. The heavily weighted technology sector was sharply lower, while the financial, steel, cement and construction stocks also finished significantly lower.
For the day, the index plummeted 233.92 points or 3.51 percent to close at 6,424.77 after trading between 6,407.75 and 6,598.61 on turnover of 86.60 billion Taiwan dollars. There were 1,792 decliners and 227 gainers, with 290 stocks finishing unchanged.
Among the decliners, U-Ming Marine was limit-down 7 percent, while Asustek Computer Inc. shrank 6.9 percent, Taiwan Semiconductor Manufacturing Co (TSMC) fell 4.23 percent, United Microelectronics (UMC) gave up 2.34 percent, MediaTek shed 4.70 percent, Powerchip Semiconductor rose 1.34 percent, Fubon Financial Holding gained 0.57 percent, AU Optronics plunged 5.67 percent, Uni-President Enterprises fell 2.37 percent, China Steel plunged 6.28 percent, Cathay Real Estate fell 3.91 percent and Shin Kong Financial was up 2.64 percent.
Wall Street offers a broadly negative lead after stocks ended Tuesday's session sharply lower, with the Dow closing down 280 points erasing nearly all of the gains posted in the previous session. Lehman Brothers was the main drag on the financial sector following reports that South Korea's Financial Services Commission Chairman Jun Kwang-woo said that talks between Lehman and Korea Development Bank have ended and declined to say if any conclusions had been reached.
Shares of Lehman Brothers fell further after Standard & Poor's put the investment bank's credit ratings on CreditWatch with negative implications. S&P stated that the drop in Lehman's stock could hinder the company's ability to raise capital.
Adding to the selling pressure, the National Association of Realtors released a key report on pending home sales. The NAR said that that pending home sales fell by 3.2 percent in July following an upwardly revised 5.8 percent increase in June, much lower than economists were expecting. Economists had expected pending home sales to fall by 1.4 percent compared to the 5.3 percent increase originally reported for the previous month.
The major averages fell further in the final hour of the session, closing at their worst levels of the day. The Dow closed down 280.01 points or 2.4 percent at 11,230.73, the Nasdaq closed down 59.95 points or 2.6 percent at 2,209.81 and the S&P 500 closed down 43.28 points or 3.4 percent at 1,224.51.
In corporate news, contract chip maker United Microelectronics Corp saw August sales fall 21.7 percent from a year ago, the company said on Tuesday, declining for a third straight month. UMC posted sales of 8.165 billion Taiwan dollars in August, down from 10.433 billion Taiwan dollars a year earlier, the data showed. UMC's sales were 8.537 billion Taiwan dollars in July.
Also, Hong Kong-listed Want Want China Holdings Ltd. will apply to sell shares in Taiwan, the company said on Tuesday. Based in Shanghai, the rice cracker maker derives more than 90 percent of its revenue from China and is among the first Taiwanese-founded companies operating in the mainland to plan a share sale on the island. Want Want will sell between 100 million and 250 million shares or 1.9 percent.
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