NT$2.97 bil. in stocks sold as foreign capital moves out of nation

Following the recent exodus of foreign capital, institutional investors have sold a net NT$2.97 billion worth of stocks in the bourse.

Last week foreign investors pulled US$2.8 billion out of emerging markets in Asia. The group placed a US$2.66 billion net sell in Taiwan’s stock market alone.

MSCI earlier lowered Taiwan’s weighting in the MSCI Emerging Markets Index from 11.88 percent to 11.63 percent. It was the 11th straight downward adjustment.

China’s weighting, on the other hand, rose 2.4 percentage points to 26.49 percent. The increase squeezed the weighting in other markets as a result.

The change in index will wield short-term impact on the capital market in Taiwan, said Chou Chun-hung (???), a fund manager at CTBC Investments (??????). Added to the gloomy outlook is Taiwan’s tumbling export orders in April, the 15th month of consecutive annual decline.

Other uncertainty includes this Friday’s presidential inauguration and the new government’s dubious cross-strait policy, Chou added.

Since the MSCI index is closely followed by foreign institutional investors when they devise investment strategies in Asia, the weighting cut in the MSCI index could lead foreign investors to move funds out of Taiwan’s stock market, analysts said.

Given that the stock market has slumped nearly 10 percent, Chou forecast that a rebound is on the horizon. Investors may consider stocks that are on track for sure growth, the fund manager recommended.

Foreign Capital Flew out for Three Straight Weeks erday foreign institutional investors sold a net NT$4.46 billion worth of shares on the Taiwan Stock Exchange.

Analysts said foreign capital has been flowing out of Taiwan for three weeks in a row, and the amount is relatively high compared with those of other countries in Asia like South Korea, Thailand, Indonesia and Vietnam.

JPMorgan’s fund manager Yeh Hung-ju (???), however, remained confident in the bourse market. The listed companies of Taiwan have good ratings and fundamentals and are often undervalued, Yeh said.

The adjustment in MSCI has wielded less and less impact on the stock market over the past 3.5 years, Yeh pointed out, adding that the relationship between the two has even become “unhooked” sometimes.

The market is not influenced mainly by the MSCI, but the investment atmosphere in general, the fund manager noted.

It is worth noting that biotechnology stocks are starting to gain favor among foreign institutional investors. Despite the scandal involving drug company OBI Pharma (??), the sector was given more weighting in the MSCI index, signaling Taiwan’s potential in the field, Yeh said.

Source: China Post