The Taiwan stock market has finished higher now in back-to-back sessions since ending the two-day losing streak that saw it shed more than 85 points or 1.6 percent. The Taiwan Stock Exchange broke through resistance at 5,200 points, but now investors are looking for a bit of a pullback at the opening of trade on Wednesday.
The global forecast for the Asian markets calls for a correction to the downside in the form of profit taking as many of the regional bourses are riding moderate winning streaks and have posted sizeable gains in recent weeks. The financials in particular have risen sharply in the last week and could be ripe for some selling pressure. The European markets ended the trading day mixed, while the U.S. markets all finished lower - and the Asian bourses are tipped to follow suit.
The TSE finished sharply higher again on Tuesday for its best close in five months, boosted by gains among the financial, technology and steel stocks.
For the day, the index surged 118 points or 2.3 percent to close at 5,242.18 after trading between 5,205.94 and 5,264.94 on turnover of 139.06 billion Taiwan dollars. There were 1,574 gainers and 399 decliners, with 120 stocks finishing unchanged.
Among the gainers, ProMOS, United Microelectronics Corp and Shin Kong Financial all closed limit-up 7.0 percent, while Fubon Financial rose 3.29 percent, China Steel added 3.7 percent and Taiwan Semiconductor Manufacturing Co was up 4.2 percent.
The lead from Wall Street has cooled as stocks moved back to the downside going into the close of trading on Tuesday after failing to sustain an afternoon recovery attempt. The major averages all ended the day firmly in negative territory, partly offsetting the standout gains posted in the previous session. While profit taking contributed to some weakness in the markets, selling pressure remained relatively subdued, helping the major averages to hold onto the bulk of Monday's gains.
For much of the session, traders were keeping a close eye on Capitol Hill, with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner testifying before the House Financial Services Committee. During his testimony, Geithner said the near-collapse of AIG (AIG) highlights broad failures of the U.S. financial system, and he pledged to work on improving the regulatory structure in order to prevent another similar situation.
I share the anger and frustration of the American people, not just about the compensation practices at AIG and in other parts of our financial system, but that our system permitted a scale of risk-taking that has caused grave damage to the fortunes of all Americans, Geithner said.
Bernanke added that the bonuses paid to employees of AIG were highly inappropriate. At the same time, Bernanke outlined the reasoning behind the government's repeated interventions to prop up AIG despite severe mismanagement within the embattled insurance giant. The Fed Chairman noted that AIG must scrupulously avoid any excessive and unwarranted compensation.
We have pressed AIG to ensure that all compensation decisions are covered by robust corporate governance, including internal review, review by the Compensation Committee of the Board of Directors, and consultations with outside experts, Bernanke said.
However, the attacks on AIG have pushed other financial groups to work to return government funds as soon as possible. According to the Wall Street Journal, Goldman Sachs (GS) may sell its stake in the Industrial and Commercial Bank of China to help it repay the $10 billion it received under the TARP.
The major averages pulled back to new lows for the session in late-day trading, although they ended the session just off their worst levels. The Dow closed down 115.65 points or 1.5 percent at 7,660.21, the Nasdaq closed down 37.34 points or 2.4 percent at 1,518.43 and the S&P 500 closed down 16.58 points or 2 percent at 806.34.
In economic news, Taiwan's export orders fell 22.27 percent annually in February, at a slower pace compared to a 41.67 percent drop in the previous month, the Department of Statistics, Ministry of Economic Affairs said on Tuesday. Economists expected orders to decline 29.4 percent. The agency also said industrial production fell 27.14 percent annually in February, compared to a 43.31 percent drop in the previous month. Economists were looking for a decline of 29.5 percent.
Also, industrial production in Taiwan fell 27.14 percent annually in February, compared to a 43.31 percent drop in the previous month, the Department of Statistics, Ministry of Economic Affairs said on Tuesday. Economists expected a drop of 29.5 percent.
Manufacturing output fell 27.65 percent in February compared to a 44.94 percent drop in the previous month. Mining and quarrying output slipped 10.38 percent, slower than a 31.58 percent drop in January. Production of electricity and water supply fell 10.96 percent compared to a 16.64 percent fall in the previous month.
On a monthly basis, industrial output rose a seasonally adjusted 3.32 percent in February, reversing the 3.07 percent decline in January.
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