SINGAPORE, March 26 (UPI) -- Geopolitical concerns dominated stock market activity this week with the controversial win of President Chen Shui-bian in Taiwan and Israel's killing of Sheik Ahmed Yassin, a founder of the militant Palestinian group Hamas, weighting on investor sentiment.
Taiwan cast a shadow over the entire region after the narrow election victory of Chen sparked street protests and calls for a vote recount. Over the weekend, Chen had won a new presidential mandate with just 50.1 percent of the vote, compared to 49.9 percent for opposition candidate Lien Chan. The balloting was held one day after Chen was lightly wounded in a mysterious shooting. The opposition is claiming the election was marred both by the shooting and by voting irregularities.
The Taiwanese market, which had been the best-performing in Asia this year outside China, plunged 6.7 percent on Monday alone and by Friday was down 10 percent on the week, with the TAIEX at 6.132.62.
Meanwhile, there was concern the killing of the Hamas founder would prompt retaliatory attacks against Israeli and possibly American targets, which only added the on-going fears of terrorist attacks in Europe.
Hopes Chen's call for a vote recount would ease the political tension helped regional markets move back up again in the middle of the week. Yet, with nothing resolved by the end of the week, there was still great concern amongst investors that the country could be in for a long period of uncertainty.
The selling caught many by surprise given the island's strong economic prospects. A survey report released by the Taiwan Institute of Economic Research (TIER) showed its business condition index for February hitting an all-time high with almost all the domestic manufacturers polled in February optimistic about the outlook for the economy.
Two mitigating factors helped the TAIEX to limit its losses. First index compiler FTSE placed Taiwan and South Korea on a watch list for possible upgrade to developed market status, a promotion that could bring in new investment.
Second, tech shares lend some support on the back of Nasdaq performance, as well as share buy-back announcement made by TSMC and UMC. Both companies decided to take advantage of the plunge in their stock prices (down about 13 percent) to activate their plan.
The transportation sector was one of the worst affected this year as investors felt a win by Chen would delay the opening of direct links with China. Companies like Evergreen Marine and China Airlines posted sharp losses.
The negative sentiment toward Taiwan weighted on the Korean market, which has already been undermined by the uncertainty surrounding the impeachment of President Roh Moo-hyun.
Even news index compiler FTSE had placed the country on a watch list for possible upgrade to developed market status from next year failed to revive interest.
Bargain hunting on tech shares which were tacking Wall Street did help lift the market at the end of the week, but the benchmark Korea Composite Stock Price Index (KOSPI) still closed Friday at 863.95, down 2.2 percent on the week.
On the macroeconomic front, a central bank survey showed a majority of consumers remained pessimistic about the economy in the first quarter.
Given the general negative mood in the region, the Singapore market held well with the Straits Times index closing Friday at 1,827.11, only down 0.6 percent on the week.
Positive economic data and interest in Temasek-linked companies lend some support. The country's manufactory output expanded at a record annual pace in February boosted by strong global demand for drugs and electronics goods. Temasek, the government's investment arm, intends for the first time in its 30-year history to open its books to the public.
Singapore Telecommunications gathered some interest on news the company made close to $540 million net gain from Belgacom's initial public offering.
Oversea-Chinese Banking Corp. rose after announcing it had taken a 22.5 percent stake in Indonesia's Bank NISP for around S$119 million. The Singapore bank indicated it intended to increase this stake to a majority stake over time.
Concerns about the political situation in Taiwan dominated activity and the blue-chip Hang Seng Index closed Friday at 12,483.24, down 2.4 percent on the week.
China Unicom was one of the worst performers after the company reported a weaker-than-expected result for 2003. China Southern Airlines was also down on fears the victory of Chen would delay direct links between Taiwan and China.
CITIC Pacific posted modest gains on news reports it was in talks to take part in a multi-million dollar water supply joint venture in Changzhou.
The market failed to capitalize on stellar national election results for the ruling party, and was dragged down by the general negative mood in the region. Prime Minister Abdullah Badawi's secular Barisan Nasional was returned to power with a massive majority and even managed to wrestle away a state held by the Islamic opposition. The win is viewed as very positive for the medium-term as it will allow Abdullah to pursue his policies, while reducing political risks on the country.
Still the benchmark Composite Index of 100 blue chips closed Friday at 895.12, down 1 percent on the week.
Many investors awaited the central bank's gross domestic product projection for 2004 (which were to be released after the market close Friday), as well as the new cabinet lineup to be announced Saturday. Investors are hoping he will promote new faces.
The Stock Exchange of Thailand Index closed Friday at 665.25, down 2.3 percent on the week.
Beyond the Taiwan election concern, renewed violence in Southern Thailand also weighted on sentiment, already undermined by the uncertainties related to the delay in the privatization of Electricity Generating Authority of Thailand (EGAT).
Television broadcaster, iTV, lost ground on news reports the Office of the Prime Minister had decided to file a lawsuit seeking revocation of an arbitration panel's ruling in favor of the broadcaster and allowing it to slash concession fees and lift restrictions on its entertainment content.