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Surprise!
It's a Bull Market
But
Taiwan is not out of the woods yet, says John Brebeck
By
MAUREEN TKACIK
March
21, 2000
Web posted at 8:30 p.m. Hong Kong time, 7:30 a.m. EST
Maureen Tkacik spoke to John Brebeck, strategist at Jardine Fleming
Taiwan. Special thanks to Bernard Lo, anchorman, CNBC Asia.
Bernie, if you are out there, I have four words:
Nanny nanny, boo boo.
Actually, two more: limit up. That's right, it's Taiwan we're talking
about. And I am talking about CNBC's Bernard
Lo. Bernie woke up this morning (a lot earlier than the rest
of us), peered bleary-eyed at the Bloomberg, and gleefully noticed
that the Taiwan Semiconductor ADR (American Depository Receipt)
was tanking on Wall Street. Thirteen point four-five per cent, to
be exact.
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(Now, the TSMC ADR is a famously volatile scrip. There are only
so many of them and, predictably, Americans tend to get a wee bit
more agitated than their Asian counterparts over the nuances of
cross-Straits tensions. Nevertheless, Lo was vindicated.)
"A-ha!" thought Lo. "Of course it's down thirteen point four-five
percent! And so would the whole Taiwan Weighted Index be, if the
government hadn't imposed those draconian currency controls it did
on Monday. If the Taiwan Semiconductor ADR is anything to go by,"
cautioned Lo triumphantly this morning to his 7 a.m. audience, "the
TAIEX will see further selling today."
Well, it didn't. In fact, there was quite a bit of buying on the
Taiwan bourse today. Microprocessor-maker Via Technologies was up
6.87%. PC-manufacturing giant Acer was up 6.67%. Notebook manufacturers
Arima and Compal were both up 6.9%. Switch-maker Xycel was up 6.63%,
Realtek was up 6.93%. And yes, Taiwan Semiconductor was up 5.98%.
Q: So, what happened John?
A: Well, it was a very surprising day.
Q: Especially on the back of the NASDAQ tanking 4%, no?
A: Well, the correlation between the NASDAQ and the Taiwan index
is never very close, but it was really quite striking. The index
opened down 150 points, and then just immediately bounced back,
to finish up 5.5%. Electronics of course led the way at 6.3% up.
But everything was up. Across the board, in all sectors you had
limit up and we closed with an appreciable amount of buy orders
for tomorrow, which would suggest we will start the day tomorrow
with some buying. Of course, we closed yesterday with quite a few
sell orders that just never ended up transacting.
Q: So we're talking about a pretty volatile mood? But sentiment's
undoubtedly improved, right?
A: Well, sentiment is still mixed because there are so many
uncertainties, and I would not be surprised to see a lot of volatility
in the short term because there are a lot of people worried about
tax reform, who will comprise Chen's cabinet, what happens to the
KMT's assets and so on. But with the index above 9,000 at today's
close, I would also discount the possibility of it falling to 7,500
like we were predicting.
Q: Obviously, the domestic situation is still pretty unclear.
Can you think of anything that would have turned sentiment around
so dramatically?
A: The protests against Lee Teng-hui were causing a lot of concern,
quite rightfully. But we had a talk with the ex-chairman of the
SFC last night and he said that if the protests stopped the index
would probably have a chance to rebound, and he was probably right.
The protests have subsided significantly.
Q: And what of the government's involvement in this rally? That
is, is this really a rally?
A: Oh yeah. The government typically will choose a bottom point
to buy strongly at, but they just would not have had the time to
do that today. And they didn't need to. I think in the end, people
just woke up and saw that the economic fundamentals are so strong
in Taiwan, and the earnings outlook for most of these companies
is so good that the index just didn't deserve to see 8,000 or lower.
But we're not out of the woods yet.
Take heart, Bernie. You might have your Taiwanese bear market yet.
Be
it overvalued tech stocks, high-profile mergers or corruption scandals,
the region's stock markets can go on wild rides. Join the discussion
here
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