Taiwan stocks edge lower

Taiwan stocks fell 0.22 percent on Thursday, as LCD shares such as AU Optronics dropped despite a media report that the government may be taking steps to support the struggling industry. The main TAIEX share index closed down 9.64 points at 4,413.45, with turnover paltry at T$29 billion ($880 million) on Christmas Day, as investors stayed mostly sidelined while major markets were closed for the holiday.
Wednesday's turnover was also thin at T$43 billion. "Although a previous rebound might still continue, the fundamentals of the economy are too weak to prop up stocks alone. Investors will closely watch Wall Street's movement after the Christmas holiday," said Karen Lin, a fund manager of Paradigm Asset Management.
Lin expected the market to trade between 4,000-4,700 points before the end of the year. AU Optronics and Chi Mei, the top two LCD makers, fell 0.45 percent and 2.44 percent, respectively, even after AU said it was open to proposals that could benefit the industry, amid talk that the government could broker a consolidation of the struggling sector.
AU's comments came a day after local media reported Shi Wen-lung, the founder of Chi Mei, said he remained open to any possible merger opportunities among peers in the industry. "What Shi Wen-lung said showed that the outlook for the sector is pretty bad. But I think the government should simply let LCD companies fail or talk merger deals themselves, instead of spending more money to help them," said Lin.
Adding gloom to LCD shares was another newspaper that said Goldman Sachs had cut its target price for AU and Chi Mei, but added the investment house believed a recovery should be in sight by the end of the first quarter of 2009. The electronics sub-index ended down 0.24 percent, with Taiwan Semiconductor Manufacturing Co (TSMC), the world's top contract chip maker, losing 0.69 percent.
Banking stocks lost steam after rising previously on news reports Chinese regulators will lift rules that require Taiwanese banks to operate for at least three years in China before being allowed to do business in the Chinese yuan.
Cathay Financial, the island's largest listed financial holding firm, dropped 0.43 percent, pulling the financial sub-index 0.3 percent lower. One bright spot was the construction sub-index, the biggest winner of the day, which gained 1.06 percent. The rise came after a newspaper reported the financial regulator might loosen rules allowing insurance companies to invest in the housing market after government officials hold talks with insurance firms and scholars.