The Taiwan stock market has finished lower now in back-to-back sessions after seeing an end to the winning streak that lifted it more than 500 points or 8 percent. The Taiwan Stock Exchange fell through support at 6,100 points on Thursday and could fall even lower on Friday, analysts say - possibly testing support at 6,000 points.
Caution reigns supreme in the global forecast as investors around the world wait to see if the U.S. government can hammer out details for its $700 billion rescue package for the beleaguered financial system. Some weak economic data out of the U.S. was largely shrugged off as investors were optimistic about the bailout for the financials, sending the U.S. stocks firmly higher. The Asian stocks are likely to keep a tight range until more details on the rescue plan are released.
The TSE finished sharply lower on Thursday as profit takers locked in gains from the winning streak earlier in the week. The financials were sharply lower again, while the cement, transportation, construction and electronics stocks also finished significantly lower.
For the day, the index lost 71.77 points or 1.17 percent to close at 6,060.83 after trading between 6,028.77 and 6,164.59 on turnover of 73.01 billion Taiwan dollars. There were 1,232 decliners and 490 gainers, with 363 stocks finishing unchanged.
Among the decliners, Chinese Maritime and Taiwan Cement were limit-down 7 percent, while Cathay Financial lost 2.42 percent, Shin Kong Financial gave up 3.57 percent, Taishin Financial declined 3.37 percent, Taiwan Semiconductor Manufacturing Co (TSMC) lost 0.58 percent, United Microelectronics (UMC) dropped 0.48 percent, Cathay Real Estate shed 6.76 percent and Hon Hai lost 3.89 percent.
Wall Street provides a cautiously optimistic lead as stocks ended Thursday's session with substantial gains, with investors encouraged that Capital Hill is close to reaching an agreement over the government's proposed bailout plan. The news prompted traders to look for bargains following the sell offs seen earlier in the week.
Senate Democratic leaders are hopeful a deal will be reached soon to move forward with a plan to buy up troubled securities and restore liquidity to the credit markets. There seemed to be agreement on the principles of the deal, which President Bush initially proposed as a $700 billion measure to allow the Treasury Department to buy up mortgage-backed securities and other troubled assets.
Nonetheless, a group of House Republicans issued a last-minute call for a radical redesign of the Bush Administration's bailout proposal. Instead of buying up troubled and illiquid assets like mortgage-backed securities, the government should offer insurance - for which private companies would pay premiums - to back mortgages and financial instruments based on mortgages.
Also, a bipartisan group of 32 senators is calling for a special auditor for any federal bailout program for financial institutions. The group says a special investigator general for the program would be an important step to preventing waste, fraud and abuse. The senators are calling for the new IG to be nominated within 30 days of approval of a bailout plan and demand that the inspector have full power to investigate, audit and issue subpoenas.
Earlier in the day, the Commerce Department said that orders for goods meant to last for at least three years showed a substantial decrease in the month of August, far exceeding economist estimates. Also, the Labor Department released its report on initial jobless claims in the week ended September 20, showing that jobless claims unexpectedly increased to their highest level in nearly seven years. Finally, new home sales showed a substantial decrease in August, according to the Commerce Department.
While the major averages ended the session well off of their intraday highs, they still posted considerable gains. The Dow closed up 196.89 points or 1.8 percent at 11,022.06, the Nasdaq closed up 30.89 points or 1.4 percent at 2,186.57 and the S&P 500 closed up 23.31 points or 2 percent at 1,209.18.
In economic news, Taiwan will on Friday release its leading index for August, with expectations of a 0.3 percent decline from the previous month. The index was 0.6 percent lower on month in July.
Also, the Taiwan central bank lowered the discount rate by 12.5 basis points to 3.5 percent in an unexpected move. At the same time, the central bank slashed the rate on accommodations with collateral to 3.875 percent and the rate on accommodations without collateral to 5.75 percent. The new interest rates will be effective from today. The Taiwan central bank slashed interest rates for the first time since 2003. The central bank said the decision was in light of lower inflationary pressure and rising downside risks to economic growth, as well as to reflect movements of market interest rates.
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