Taiwan stocks are expected to stay under pressure this week, with little prospect of a quick end to a political crisis that has paralysed one of Asia's most vibrant economies and drawn threats from arch-rival China.
But, after falling 10 percent last week, the worst may be over for the market, analysts said.
"The election disputes probably can't be resolved quickly, but most of the risk has been priced in," said Alex Huang, assistant vice president at Barits International Securities. "Some investors are already switching their attention back to fundamentals."
President Chen Shui-bian said on Saturday he would agree to a recount, in the March 20 elections that he won by a wafer-thin majority, if his opponent filed a lawsuit to contest the result.
"We hope after we file the lawsuit tomorrow, the recount can start the next day," Nationalist spokesman Justin Chou said on Sunday.
The election result had triggered a week-long protest outside the presidential palace, that culminated in a massive demonstration on Saturday.
Huang said he expected Taiwan's TAIEX share index to swing in a 6,000-6,400 range this week. The index, which had been Asia's best performer outside of China this year until the election, ended at 6,132.62 last week.
There could be more pain for transportation shares such as China Airlines, the island's largest carrier that plunged 29 percent last week, and EVA Airways as the political concerns would jeopardise travel, analysts said.
Market players had bet on a victory for opposition candidate Lien Chan, which they believed would improve travel and commercial ties with China, Taiwan's largest export market.
Shoe maker Pou Chen and China Motor could also slide as they are large investors in the mainland. The two stocks fell 17 percent and 11 percent respectively, last week.
Foreign investors were net buyers of T$3.76 billion ($112.9 million) in Taiwan stocks on Friday, after selling a net T$6.78 billion in the previous session.
Index compiler FTSE placed Taiwan and South Korea on a watch list last week for possible upgrade to developed market status, a promotion that could bring in new investment.
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