- Title: TAIWAN: Taiwan market hits 2-wk closing low on record export slump
- Date: 9th January 2009
- Summary: TAIPEI, TAIWAN (FILE) (REUTERS) PEOPLE AT A COMPUTER EXHIBITION PEOPLE LOOKING AT LAPTOP COMPUTERS A MAN DEMONSTRATING FUNCTIONS OF A LAPTOP COMPUTER A MAN DEMONSTRATING FUNCTIONS BY ADJUSTING ON A CONTROL PANEL PEOPLE LOOKING AT LAPTOP COMPUTERS A WOMAN WRITING ON A COMPUTER SCREEN WRITINGS ON THE SCREEN CROWD AT A COMPUTER EXHIBITION
- Embargoed: 24th January 2009 12:00
- Topics: Economic News
- Reuters ID: LVA97DVBIYIWB2CZBPFERH10NVBF
- Story Text: Taiwan stocks fell 5 percent after a record export drop and the central bank's announcement of making another snap rate cut.
Taiwan stocks fell 5.3 percent on Thursday (January 8), its biggest single-day drop in two months, after exports sank at a record pace in December, while chipmaker TSMC fell on a revenue warning from Intel Corp.
The main TAIEX share index ended down 254.05 points at 4,535.79, posting its largest one-day percentage decline since Nov. 6, 2008.
The market also hit its lowest finish since Dec. 29, 2008.
The fall was further weighed down by losses on Wall Street, ending TAIEX's five session winning streak during which it jumped about 8.5 percent.
The electronics sub-index dropped 5.53 percent as Taiwan posted a 42 percent fall in December exports after the market closed on Wednesday (January 7), prompting the island's central bank to cut interest rates by 50 basis points.
"The discount rate, accommodations with collateral, and accommodation without collateral, each lowered by 0.75% points. From 2.00%,
375% and 4.25% adjusted to 1.50%, 1.875% and 4.25%, respectively. Effective from January 8," announced the Central Bank.
Exports sank 42 percent in December as electronics shipments marked the biggest fall on record.
Exports to China including Hong Kong tumbled a record 54 percent.
The central bank said last month's export slump was having a severe impact on the economy. It reduced the benchmark interest rate to 1.5 percent from 2 percent in the sixth cut since a global credit squeeze tore through the U.S. banking system in September.
"For export, most people expected a 30 percent or 29 percent drop, but it unexpectedly dropped 41.9 percent. This is a very very large drop," said central bank governor, Perng Fai-nan.
Demand in Taiwan is also crumbling.
Imports fell 44.6 percent, allowing the island to post a trade surplus in December.
Imports of consumer goods fell by an annual 12 percent in December, sparking worries that Taiwan might see temporary deflation this year.
The central bank said the continued lowering of interest rates will help boost domestic consumption.
It will also help lessen borrowing costs for individuals and companies and will help lift sentiment for private consumption and investments.
The benchmark discount rate of 1.5 percent takes effect on Thursday and is the lowest since September 2004, when the rate was at a record low of 1.375 percent.
Goldman Sachs forecast Taiwan's economy would shrink 3 percent this year, after growing an estimated 1.5 percent in 2008 in a note that said its leading indicator of the global industrial cycle showed foreign demand would keep crumbling.
Taiwan's electronics exports fell by an annual 43.4 percent.
Taiwan makes 80 percent of the world's laptop computers and more than 40 percent of the world's flat-panel displays.
It is home to the world's two biggest contract chip makers: Taiwan Semiconductor Manufacturing Co Ltd and United Microelectronics Corp.
"The real decline was in the fourth quarter, especially after November, because electronic products usually have increased sales in the second half of the year after June, and it usually concentrates around Christmas. When we don't have good sales for Christmas then we don't have good sales for anything. If only Wal-Mart has good sales then you can see the impact on our industry. The most severe impact was after mid-November until December, export dropped straight down," said Luo Huai-jia, vice-president of Taiwan Electrical and Electronic Manufacturer's Association.
The central bank said it would not cut interest rates to zero.
The United States, Taiwan's second-biggest customer after China, has resorted to near zero interest rates after mortgage defaults and bank failures pushed the economy into recession.
Taiwan's dramatic exports fall could point to further falls in Chinese exports since some of the island's shipments to China are ultimately re-exported to developed markets.
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