The United States announced that June's consumer price index grew at 9.1 percent year-over-year, a new high in more than 40 years. The S&P 500 index ended lower on July 13 after fluctuating for much of the session as investors digested hotter-than-expected U.S. inflation data, which fueled fears that the Federal Reserve could raise key interest rates by as much as 100 basis points later this month. Experts said that once the U.S. economy declines, Taiwan's exports may be affected in the future. Taiwan stocks responded to the negative news by falling as much as 165 points at one point during the session.
Juan Ching-hwa, Executive Secretary, National Financial Stabilization Fund: “Because we have now decided to enter the market, I cannot comment. Of course, we will pay attention to stock market performance.”
Deputy Finance Minister Juan Ching-hwa, also the operational head of the National Financial Stabilization Fund, held a meeting before the Taiwanese stock market opened on the 14th. The price performance of Taiwan stocks on the 14th did not continue its strength from the previous day's price support from the NFSF. The U.S. just announced that June's consumer price index reached 9.1 percent year-on-year, a new high in more than 40 years. Due to the drop in all three U.S. stock indexes, Taiwanese stocks plummeted as soon as the market opened on the 14th, falling as much as 165 points during the session. However, the bulls battled the bears throughout the session, with the NFSF supporting the market. At 11 a.m., the market rose more than 100 points.
Wang Jung-hsu, CEO, Marbo Investment Advisors: “There is no way for human intervention to influence the global negative trend. The NFSF is to support the market from falling further, rather than pull up stock prices so everyone can unravel and profit from their positions. The NFSF usually target large-cap stocks in their stock buying.”
TSMC's stock price bucked the trend and increased, due to NFSF's support. TSMC is expected to report new record revenues for the third quarter. Its stock price performed well intraday and once rose by as much as NT$7. The U.S. inflation is severe. Analysts predict the U.S. Federal Reserve will aggressively hike interest rates to curb prices, possibly as high as 1 percent. Experts said that if the U.S. economy is affected in the future, it may negatively affect Taiwan's exports.
Chiu Ta-sheng, Analyst, International Affairs Dept., TIER: “A tightening by the U.S. Fed will ultimately suppress consumer demand in the country. This should negatively impact Taiwanese exports in the second half of this year.”
The International Monetary Fund revised the U.S. economic growth forecast for this year and next year. It warned that inflation has risen across the board and that both the U.S. and global economies pose systemic risks. Experts said that Taiwan's export performance in the second half of this year is critical to whether the country can maintain a 4 percent economic growth rate.