Taiwan's Stock Index Drops Below 5,000; First Time Since 2003

By Janet Ong and Chinmei Sung

Oct. 13 (Bloomberg) -- Taiwan stocks fell, dragging the benchmark index below 5,000 for the first time in more than five years on concern the credit crisis will slow the global economy. Chunghwa Telecom Co. led declines.

The Taiex lost 110.27, or 2.2 percent, to 5,020.44 in Taipei after falling to as low as 4,971.36. Markets were shut for a holiday on Oct. 10, when the MSCI Asia Pacific Index slumped 6.9 percent. Today's drop in Taiwan was capped after the government halved the daily limit on stock declines and extended a ban on short selling.

``These measures are like firemen coming in to fight the fire after it broke out -- they can't put out the fire immediately, but can try to control it,'' said Dick Tsao, who helps manage about $185 million at Taiwan International Investment Management Co. in Taipei. ``There is also some catch- up selling as the domestic market was closed on Friday.''

The Taiex last traded below 5,000 in July 2003. A rout that has wiped $28 trillion in value from global stock markets this year has helped dragged the gauge down by 44 percent. MSCI's Asia Pacific index last week had its biggest weekly drop on record on heightened concern the credit crisis will trigger more company failures.

Taiwan's government yesterday announced it will halve the limit on daily stock declines to 3.5 percent for this week to curb stock-market declines. The daily limit for increases will be unchanged at 7 percent.

The financial regulator will extend its ban on short selling, introduced on Oct. 1 and due to expire on Oct. 14, until the end of the year. The government also plans to let the National Stabilization Fund continue supporting the stock market when necessary, Finance Minister Lee Sush-der said yesterday.

Chunghwa Telecom, Taiwan's largest phone operator, slipped NT$2.50, or by the 3.5 percent daily limit, to NT$69.70. The company reported a 2.5 percent drop in nine-month profit.

The following stocks rose or fell. Stock symbols are in brackets after company names.

Asustek Computer Inc. (2357 TT) dropped NT$1.75, or by its 3.5 percent daily limit, to NT$48.35. The maker of laptop computers said yesterday it will recall 300 set-top boxes it sold in Japan after they were found with computer virus.

Chinatrust Financial Holding Co. (2891 TT) declined 45 cents, or by the 3.5 percent daily limit, to NT$12.55. The owner of Taiwan's biggest issuer of credit cards reported a loss of NT$374 million ($12 million) in the third quarter because a slump in the stock market reduced the value of its investments.

Formosa Petrochemical Corp. (6505 TT) fell NT$1.30, or 1.8 percent, to NT$70.60. Taiwan's sole listed oil refiners will shelve plans to expand its factories next year after demand for oil declined, the Economic Daily News reported on Oct. 11.

Inotera Memories Inc. (3474 TT) surged 60 cents, or 6.8 percent, to NT$9.40. Micron Technology Inc., the largest U.S. memory-chip maker, agreed to buy a 35.6 percent stake in Taiwan's Inotera from rival Qimonda AG for $400 million in cash.

Largan Precision Co. (3008 TT) declined NT$10.50, or 3.5 percent, to NT$290.50. Citigroup Inc. cut the stock to ``hold'' from ``buy'' and lowered the share-price estimate to NT$310 from NT$490.

To contact the reporters on this story: Janet Ong in Taipei at jong3@bloomberg.net; Chinmei Sung in Taipei at csung4@bloomberg.net.