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Confidence crisis hits Taiwan investment and stock
2000-09-24
TAIPEI - A crisis of confidence in Taiwan's fledgling government appears to be frightening both foreign and local investors from the island and unsettling the domestic stock market. Analysts said policy uncertainties such as indecision on whether to go ahead with construction of a fourth nuclear power plant in northern Taipei county and a reservoir in southern Taiwan has worried the business community. On Thursday, credit rating agency Standard & Poor's placed state utility Taiwan Power Co's AA long-term rating under creditwatch with negative implications, partly because the fourth nuclear plant, now one-third complete, could be scrapped due to the ruling Democratic Progressive Party's anti-nuclear stand. Japanese electronics giant Sony Corp announced it would halt video production in Taiwan by December and move the operation to Malaysia and mainland China to cut costs. Among local investors, Taiwan newspapers said plastics tycoon Wang Yung-ching plans to revive a petrochemical complex in China's southeastern province of Fujian in defiance of Taiwan authorities who shelved the multi-billion dollar project in 1992. "For many businesses, the uncertainty is the most unbearable and terrifying," said Emile Sheng, professor of Soochow University. "Now the bigger problem facing the new government is the uncertainty on its policy and personnel," Sheng said, warning it could trigger a chain effect of business moving overseas. Taiwan has banned its businesses from investing in petrochemical and high technology ventures in political arch-rival China in case the island becomes economically dependent on its long-time political rival. But Taiwan investors have poured US$40 billion into China, attracted by low labour costs as well as a common language and culture. Although the government says the island's fundamentals remain sound with double-digit growth in imports and exports with a 6.57 percent rise in gross domestic product forecast for 2000, analysts said policy uncertainties had fueled pessimism. "When the political fundamentals are not good, how can you say that our fundamentals are healthy?" asked Sheng, who teaches political science. A whopping 90 percent of viewers who phoned in to cable television network TVBS' popular talk show said they had no confidence in the new government. GLOOMY OUTLOOK Analysts said a lack of confidence in Chen's fledgeling administration, which unseated the Nationalist Party for the first time in five decades, has added further gloom to the local stock market. Former premier Vincent Siew wrote in the mass circulation United Daily News that there was a lack of confidence in Taiwan's economic outlook. Siew, a vice chairman of the main opposition Nationalist Party, said one of the main reasons was "strong uncertainty" in delicate ties with China. Tensions between Taiwan and China have cast a cloud over the stock market since Chen swept to power in March presidential elections. As of Friday's close, the Taiwan main stock index has fallen 21.7 percent this year and was down 35 percent from a year high of 10,202.20 points marked on February 17. Analysts said Taiwan's industries are bound to face a do-or-die battle especially after the island's admission to the World Trade Organisation and an easing of Taiwan's decades-old ban on direct trade and transport links with China. "In the next two years or so, Taiwan's industries should learn to upgrade their competitiveness or they cannot survive outside competition," said Michael On, president of Beyond Asset Management. Reuters
Taiwan ex-PM to sell common market idea to China (2001-05-08)Taiwan ex-premier seeks common market with China (2001-03-27)Confidence crisis hits Taiwan investment and stock (2000-09-24)Kuomintang congress brings in reforms (2000-06-19)Taiwan's Nationalist Party adopts sweeping reforms (2000-06-19)
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