Taiwan Stock Exchange underlines fundamentals to reassure investors

May 17, 2021
Benchmark index fell around 8 percent last week amid Covid surge

The Taiwan Stock Exchange (TWSE) has said ‘strong economic fundamentals remain intact’ and trading will not be interrupted in a bid to calm investors’ nerves following a major sell-off in shares.

The market volatility prompted TWSE to release a statement on Sunday addressing a range of topics, from the country’s Covid-19 response to economic growth and corporate profits.

Last week, Taiwan’s benchmark TAIEX index fell more than 8 percent amid a spike in Covid-19 cases in the country and questions over high equity valuations. By Monday afternoon, stocks had fallen another 3 percent.

In the announcement, the exchange says the Covid-19 situation remains ‘under control’ despite the recent rise in cases. ‘This has been possible thanks to the quick response from the government and the widespread co-operation of Taiwan’s citizens,’ it says.

The statement then addresses Taiwan’s GDP and corporate profitability, highlighting growth in both 2020 and the first quarter of 2021. ‘The statistics offer solid proof that Taiwan’s listed companies continue to enjoy profitability and to deliver good performance,’ notes the exchange.

TSWE adds that trading will not cease during the current volatility, with back-up systems in place to prevent interruptions, and companies will be monitored to ensure they disclose information in a timely manner.

On Sunday, Taiwan reported 207 new cases of Covid-19 – a record high for the country, which has excelled during the pandemic at containing the virus. Over the weekend, the country brought in a series of measures to contain the outbreak, including a partial lockdown of the capital, Taipei.

Taiwan’s stock market has also been affected by the rotation out of tech stocks into cyclicals, driven by investor concerns over inflation. The country is home to major tech names including Taiwan Semiconductor Manufacturing Company, which makes up around 30 percent of the TAIEX index.

Speaking on Bloomberg TV on Monday, Jim McCafferty, head of Asia (ex-Japan) research at Nomura, says statements of this kind from the TWSE have not been unusual during the Covid-19 pandemic.

‘I think we are seeing this in lots of markets,’ he said. ‘It’s not unique to Taiwan, it’s not unique to China. We’ve seen it with the Fed. We’ve seen it with the Bank of England. You’ve got central banks [and] lots of policy-makers intervening in private markets.’

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