Taipei, May 15, 2012 (CENS)--Trading value of Taiwan's stock market shrank to NT$46.7 billion yesterday (May 14), the lowest in the past more than three years.
The collapse of the confidence among investors has led to a number of side effects, including heavy loss of life insurance firms, due to their hefty stock investment position, and drastic shrinkage of fund raising by listed firms.
The Financial Supervisory Commission (FSC) attributed the trading shrinkage to uncertainty in the European market, without mentioning the effect of the proposed securities transaction gains tax. It also decided to refrain from intervening in the market for the time being.
Since the appearance of the controversial issue on securities transaction gains tax in March, Taiex index has been dropping continuously, causing life insurance firms to lose several tens of billions of NT dollar in their book value.
Market players said that in view of the listless Taiwanese market, life insurance firms may switch part of their funds to the mainland Chinese market, as they have obtained the status of qualified foreign institutional investors (QFII) in mainland China recently.
Due to the downturn of Taiwan's stock market, book value of Cathay Life Insurance decreased by NT$10 billion to NT$130 billion in March, which dropped further along with decline of the stock market in April. Book value of Shin Kong Life Insurance stood at NT$55.1 billion as of the end of March.
Statistics of Taiwan Insurance Institute show that investment position of Taiwanese stocks held by the life insurance industry stood at NT$820.9 billion as of the end of February this year, underscoring bullish outlook of life insurers then, which, though, have been tied up in the market now, following the market downturn.
Overshadowed by the effect of the securities transaction gains tax, fund raising by listed firms plunged to only NT$2.5 billion in April and the amount for the first four months reached NT$28.1 billion.
Affected by oil price and power rate hikes and securities transaction gains tax, Taiex index dropped 5.44% in April, with average daily trading value dipping below NT$80 billion. Foreign investors oversold NT$31.2 billion of stocks in April and NT$47.5 billion so far in May.
Wu Tang-chieh, vice chairman of the FSC, attributed the market downturn to uncertainty of the European market, which also dampened the stock price index and trading value at neighboring Asian markets, such as Korea, Japan, and Hong Kong. Foreign investors also oversold stocks in those markets, according to Wu.
(by Philip Liu)