The Taiwan stock market was up just a handful of points on Thursday, but that was enough to extend the market's winning streak to six sessions while adding more than 950 points or 17 percent on its way to a seven-month closing high. The Stock Exchange of Taiwan is closing on resistance at 6,600 points, but investors are leery about further gains, instead bracing for a modest correction in Friday's trade.
The global forecast for the Asian markets is mixed as many of the markets are overdue for profit taking following lengthy winning streaks. Investors also may be nervous ahead of the release of U.S. non-farm payroll data on Friday, which contributed to weakness among the U.S. and European markets. However, the financials may get a lift from the results of the stress tests for U.S. banks, which were released after the bell.
The TSE finished barely higher on Thursday, as sharp gains among the construction, financial and paper sectors was largely offset by weakness among the cement, plastic, technology, food and textile stocks.
For the day, the index was up 6.17 points or 0.09 percent to close at 6,572.87 after trading between 6,455.23 and 6,628.54. Volume was 10.12 billion shares worth 243.29 billion Taiwan dollars. There were 1,314 gainers and 918 decliners, with 144 stocks finishing unchanged. Leading the gainers, Farglory Construction and Kindom Construction both rose by the daily 7 percent limit.
The lead from Wall Street is negative as stocks moved sharply lower over the course of the trading day on Thursday after failing to sustain an initial upward move. The major averages all pulled back firmly into negative territory after reaching multi-month intraday highs in early trading.
The downturn was partly due to profit taking, with traders cashing in on the market's recent gains ahead of the release of the results of the government's stress tests of the nation's 19 largest financial institutions.
Authorities officially revealed the results of the stress test, saying that 10 of the 19 banks tested needed to raise a total of $74.6 billion. Bank of America is required $33.9 billion, the report said, while Wells Fargo and GMAC require $11.5 billion each. Citigroup needs $5.5 billion, Regions Financial needs $2.5 billion, Suntrust requires $2.2 billion, KeyCorp needs $1.8 billion, Morgan Stanley needs $1.8 billion, Fifth Third Bancorp needs $1.1 billion and PNC needs $600 million. American Express, BB&T, Bank of New York Mellon, Capital One, Goldman Sachs, JP Morgan Chase, MetLife, State Street and USB do not require additional capital, the report said.
Some additional selling pressure was generated by the release of the results of the Treasury Department's auction of $14 billion worth of 30-year bonds, which attracted below average demand amid record government debt sales. The Treasury said the auction drew a high yield of 4.288 percent and a bid-to-cover ratio of 2.14. The bid-to-cover ratio, an indicator of demand, came in well below the 2.40 recorded for the previous auction of $11 billion worth of 30-year bonds.
The initial strength in the markets came after the Labor Department released a report showing an unexpected decrease in initial jobless claims in the week ended May 2. The report showed that jobless claims fell to 601,000 from the previous week's revised figure of 635,000. Economists had been expecting jobless claims to edge up to 635,000 from the 631,000 originally reported for the previous week. However, the report also showed a continued increase in continuing claims, which rose to a new record high of 6.351 million in the week ended April 25 from the preceding week's revised level of 6.95 million.
In corporate news, shares of General Motors (GM) ended the session down 3.6 percent after the auto giant reported a first quarter loss of about $6 billion. GM also revealed that it burned through $10.2 billion during the quarter due largely to a 47 percent drop in sales.
The major averages moved off their lows going into the close but remained firmly negative. The Dow closed down 102.43 points or 1.2 percent at 8,409.85, the NASDAQ closed down 42.86 points or 2.4 percent at 1,716.24 and the S&P 500 closed down 12.14 points or 1.3 percent at 907.39.
In economic news, the Sixth Islamic Financial Services Board Summit started Thursday in Singapore. Heng Swee Keat, Managing Director of Monetary Authority of Singapore, said the global sukuk market remains a relatively new asset class with much room to grow out. Sukuk is an Islamic financial certificate, similar to a bond in Western finance, which complies with Islamic religious law of Sharia,
In the first half of 2009, about US$1.3 billion in sovereign sukuk issuance will come from Malaysia, Indonesia and Singapore, Heng said. More private sector issuers are expected to tap the sukuk market and to attract new investors and clients, he added.
Also, Taiwan's exports dropped 34.3 percent year-on-year in April to US$14.8 billion, slower than a 35.7 percent fall in March, the Ministry of Finance said Thursday. Economists expected exports to drop 28.3 percent. Imports slipped 41.2 percent to US$12.7 billion, after a 49.5 percent drop in the preceding month, and faster than a 37.9 percent fall expected by economists. The country hence recorded a trade surplus of US$2.13 billion in April, lower than the US$3.41 billion surplus in March. Economists expected the surplus to come in at US$2.15 billion.
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