Taipei, June 21 (CNA) The local bourse pulled back Thursday on profit taking as concerns over the global economy escalated after the U.S. Federal Reserve cut its economic outlook, dealers said.
Financial stocks suffered the heaviest downward pressure after the local media reported that negotiations between Taiwan and China on investment protection had hit a snag, dealers said.
Market sentiment turned cautious ahead of a quarterly policymaking meeting of the local central bank later in the day, with many investors waiting for the bank's assessment of the economic fundamentals, dealers said.
The weighted index closed down 55.58 points or 0.75 percent at 7,279.05, after moving between 7,259.11 and 7,311.39. Turnover during the session totaled NT$59.59 billion (US$2.0 billion).
The market opened down 0.55 percent on a lackluster Wall Street, which fell from an early high after the Fed lowered its forecast for the 2012 U.S economic growth from 2.9 percent to between 1.9 percent and 2.4 percent, dealers said.
Selling intensified among large-cap financial stocks, in particular Mega Financial Holding, amid concerns that the deadlocked cross strait talks on investment protection will hamper financial companies’ ambitions for market expansion, dealers said.
"The local bourse was still dictated by external factors, in particular continued uncertainty over the global economy," said Concord Securities analyst Kerry Huang.
Huang said the Fed's decision to continue its "Operation Twist" program, in which it sells short term bonds and buys long term ones to maintain ample liquidity, came as no surprise amid a slowing economy.
"The local bourse faced stiff resistance after the index breached 7,300 points yesterday,” Huang said. “Investors simply seized uncertainty over the global economy as a reason to take profit."
The financial sector led the broader market in trending lower and suffered the greatest pressure among the eight major sectors of the market. It ended down 1.52 percent after the local media reported the cross-strait gridlock.
"Mega Financial encountered the heaviest selling as the market had expected that the company would be the one to benefit most from closer cross strait business ties," Huang said. "The disappointment prompted investors to cut their holdings."
Mega Financial closed down 2.54 percent at NT$21.05 and First Financial ended down 2.29 percent at NT$17.05.
Elsewhere, machinery and electronics fell 0.70 percent, cement shares shed 0.67 percent, plastics and chemicals lost 0.65 percent, foodstuffs dropped 0.58 percent, textiles were down 0.27 percent, paper and pulp stocks fell 0.24 percent. The construction sector closed up 0.83 percent.
(By Frances Huang)