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"Landmine" Shares Sink Taiwan
Market Q&A with Andrew Lin, chief of electronics research, Jardine Fleming
November 5, 1999 Web posted at 8:30 p.m. Hong Kong time, 8:30 a.m. EDT
Index |
Last |
Change |
% |
Tokyo Nikkei 225 |
18355 |
+6.8 |
+0.0 |
Hong Kong Hang Seng |
13610 |
-41.2 |
-0.3 |
Sydney All Ord. |
2920 |
-15.7 |
-0.5 |
Taipei Weighted Price |
7488 |
+19.0 |
+0.3 |
Seoul Composite |
913 |
+1.3 |
+0.1 |
Singapore ST Indl. |
2112 |
+1.6 |
+0.1 |
Bombay Sensitive Index |
4598 |
+112.5 |
+2.5 |
Kuala Lumpur Comp. |
721 |
-6.2 |
-0.9 |
Bangkok SET |
418 |
-1.42 |
-0.3 |
Manila Comp. |
2018 |
-8.0 |
-0.4 |
Jakarta Comp. |
626 |
+7.5 |
+1.2 |
Data supplied by CNNfn |
Q: Market pundits hate the word "anemic." For one thing, we overuse it and that makes us feel boring and predictable. For another thing, we overuse it and that must mean the markets are boring and predictable, not to mention "anemic." And an "anemic" market is never good, whether the glass is half-empty or half-full. Dull, disinterested, indifferent--and pitiful fodder for a market commentary. Anyway, Thailand has been pretty anemic until this week. But Taiwan? It's been anemic since the Sept. 21 earthquake. Blame it on aftershocks or on Y2K, but frankly I don't buy it. Andrew, what's your take on this?
A: Well "landmine" shares are, I think, really the problem. They explode unexpectedly; that's what caused Taiwan's first "economic crisis" back a couple of years ago and that's what happened this week when the news broke that the chief executive of Taiwan Pineapple, Huang Tsung-hung, had bounced NT$40 million worth of checks.
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Q: Was the MSCI's decision to postpone an increase in Taiwan's weighting a factor?
A: No, I don't think so. I don't know why the MSCI did that; there are all kinds of rumors going around. My question is, why did they choose February 29 in the first place? Of course, a lot of investors were a bit relieved because when the 29% weighting was first announced a lot of foreign investors were complaining. There are still a lot of restrictions on buying Taiwanese stocks and they were running out of things to buy.
Q: What do you think about the new software park? (Scott Blanchard was raving about it on Monday.)
A: I think it's definitely a positive direction for Taiwan to be moving into, but on the other hand it's going to be difficult. Without a sizeable domestic market, Taiwan is going to have trouble establishing a meaningful software industry. And hardware is a completely different business model from software. It's much more capital-intensive, more reliant on research and development and testing, less on creativity.
Q: Does Taiwan have a meaningful market on the mainland--assuming restrictions are relaxed.
A: The mainland probably has a lot more capable software engineers of its own than Taiwan. And because a software business can start up with basically a few engineers and a few computers, it's a much more accessible sector for them.
Q: So what's Taiwan's future? Just chip foundries and notebooks? TSMC said its business would quadruple by 2005, and Quanta is already the third-biggest notebook manufacturer in the world.
A: Notebooks are making thinner and thinner markets. At some point Taiwan is going to have to lift its restrictions and allow Taiwanese companies to start manufacturing them on the mainland. Taiwan's future is in palm-sized notebooks, in newer and more advanced LCD screens and in mobile phone handsets.
Q: Still bullish?
A: Yes.
Interviewed by Maureen Tkacik/TIME Asia
Write to TIME at mail@web.timeasia.com
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