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Global markets have not been immune to the impact of the pandemic.
(Photo from: United Daily News)

U.S. Stocks in Bear Market, Taiwan Shares Tumble

United Daily News, March 13, 2020

 

Taiwan’s stocks experienced a “Black Friday” yesterday, March 12. The Taiwan Capitalization Weighted Stock Index (TAIEX) fluctuated dramatically and scared investors. Less than five minutes after the market opened, the index fell under 10,000 points, and at one time, it dropped by more than 700 points. When the market was expected to end the 13-month period of 10,000 points, the “National Team” (National Financial Stabilization Fund) kicked in and made a reversal to hold the 10,000 points.

 

The four indices of U.S. markets rebounded last night. The Dow Jones Industrial Average opened by rising 1,300 points, so the pressure on TAIEX to maintain 10,000 points should be alleviated a little next Monday.

 

The spread of novel coronavirus (COVID-19) in Europe and the United States has caused panic in the markets. The U.S. stock market ended a 11-year long raise and entered the bear market. Asian markets, including Taiwan’s market, are not immune from the situation.

 

Worried about the impacts on the stock and foreign exchange markets, Taiwan’s financial ministers came out to boost confidence. The Legislative Yuan also passed the NT$60 billion (about US$1.99 billion) financial relief and economic rejuvenation special budget. Chairman Wellington Koo of the Financial Supervisory Commission quickly initiated the first step measures to stabilize the market two nights ago by encouraging companies to publicize earnings, hold corporate briefings, and implement treasury stocks. Finance Minister Su Jain-rong held a press conference early yesterday morning before the market opened to announce that the National Financial Stabilization Fund will monitor the market, and if necessary, convene an ad hoc committee meeting to enter the market.

 

However, the effects of the statements by the financial ministers were limited. When the stock market opened, it plunged and the index fell under 10,000 points less than five minutes. Until midday, the index vacillated between 98,000 to 97,000 points, and at one time fell to 9,636 points, the lowest points historically. It was also the first time that the index fell under 10,000 points since January 30, 2019, causing anxieties of investors.

 

During the last hour, heavy demand for stocks entered the market. The range of the declinations of weighted stocks such as Taiwan Semiconductor Manufacturing Company (TSMC), Hon Hai Precision Industry (Foxconn), and Largan Precision were narrowed and the market quickly bounced back by 200 points. At 1 PM, the index went back to more than 10,000 points and continued to hold until the market closed at 10,128 points.

 

Market analyses indicated the reason that TAIEX reversed the fall in the last hour was the purchases of weighted stocks by the National Financial Stabilization Fund and the life insurance companies. The eight big government-led funds bought in NT$4.06 billion, and the total purchases by government-led funds had exceeded NT$16.3 billion in the past three trading days. 

 

It is noticeable that the stock price of TSMC dropped to NT$272.5 in early morning, but the price suddenly rebounded after the midday session to reach NT$290, a difference of NT$20 in a single day. Investment consultants analyzed that the reason was because foreign funds first oversold TSMC’s stocks, but in the end, the government-led funds entered to guard the price or bought on dips. What the eight big government-led funds bought the most were the stocks of TSMC, and the second most were the stocks of Foxconn.

 

The coronavirus continues to spread in Europe and the United States, and the TAIEX will face the battle to maintain 10,000 points next Monday. Investment consultants said that while Taiwan’s stock market appeared to maintain over 10,000 points, the stock prices of more than 200 companies had dropped. The key for the Taiwanese stock market next Monday will be the trend of the U.S. markets. The U.S. market bounced back last night, so Taiwan’s market will have the opportunity to bounce back. Although the epidemic is under control in Taiwan, yet the Taiwanese market cannot depart from international markets. Only if the epidemic does not expand globally can Taiwan’s stock market be stabilized.

Update: TAIEX closed at 8,681 points on March 19.

 

From: https://udn.com/news/story/7251/4413152

As Pandemic Spreads, Risks in Global Financial Markets Intensify

By Lin Chu-Chia
United Daily News, March 14, 2020

 

After a large number of Italian and Iranian people were tested positive for the novel coronavirus (COVID-19), the movement of the virus carriers spread it further into Europe and Central Asia.  Because people in the countries of these areas are used to having close contacts in hugs, plus they have no habit of wearing masks, it immediately caused an outbreak of the disease. In a matter of few days, the number of people diagnosed with the disease in Germany, France and Spain escalated to thousands. Italy has the worst epidemic situation and started to lock down several cities but was still unable to curb the spread of the epidemic, and finally declared lockdown of the entire nation. In the vast country of United States, many states also fell to this coronavirus. Two National Basketball Association (NBA) players are now tested positive and all games are suspended lest the players and spectators should be infected.

In the face of the global coronavirus outbreaks, governments have discouraged people from travelling or engaging in various large-scale events to reduce the chance of cross-infection, thus the demand for tourism, catering, conventions, exhibitions and sport events has greatly reduced, and the corresponding demand for transportation has also decreased substantially. International oil prices also fell. The Organization of Petroleum Exporting Countries (OPEC) originally hoped that all oil-producing countries would jointly reduce production in response to reduced demand with a view to avoiding a nosedive of oil prices. However, Russia was unwilling to cooperate and that led to a sharp drop in international oil prices. Among them, West Texas Intermediate (WTI) crude oil had fallen to $31 per barrel!

Under the dual influence of the continuous expansion of the epidemic and the sharp decline in international oil prices, global investors lost confidence in the future international economy and began to panic and sell off stocks. The worst of all is the global stock market leader, the U.S. Dow Jones Industrial Average index. The Dow suddenly fell more than 2,000 points on Monday, March 9, the second largest drop in a single day in history. The fierce plunge triggered off the "Circuit Breaker” mechanism, and the market was forced to stop trading for 15 minutes. On the next day, the Dow rebounded by 1,167 points, but fell sharply again by 1,465 points on Wednesday, and again by 2,353 points on Thursday. Then it rebounded by 1985 points on Friday. Calculated from the record high of 29,551 points on February 12, to closing at 23,185 points on March 13, a month-to-date drop of 21.5 percent officially ushered in a bear market.  Moreover, vexed by prolonged epidemic spread, the volatile stock market fluctuations may become normal phenomena in the short term.  Investors have to tread carefully.

 [Update: The Dow Jones Industrial Average (DJIA) closed at 19,898 points on March 18.]

 

Not only the Dow Jones index, NASDAQ, Nikkei and Taiwan’s TAIEX have all fallen sharply. If calculated from the beginning of January to March 13, NASDAQ fell by 13.4 percent in total and the Nikkei fell by 21.6 percent. Although Taiwan's epidemic is well under control, the TAIEX has nonetheless fallen by 16.3 percent as of March 13.

 

The stock market is a window on economy and one of the most important economic leading indicators. It will reflect investors' expectations for the future economy.  Being affected by the prolonged coronavirus epidemic, it is reasonable that people expect the global economy will slow down as time goes on, causing stock prices to fall.  While the stock market reflects investors’ expectations for the future economy, it is also significantly affected by psychological factors. The biggest problem now is that investors have no idea how much the epidemic impact will be, and how long it will last; under the uncertain circumstances, most investors will remain conservative, causing the stock prices to fall continually.

 

Another key issue is, in the face of such a severe epidemic and the impact on the economy, what measures the government will take to curb the epidemic and what policy tools to be adopted to stimulate the economy. Unfortunately, at the early stage, U.S. President Donald Trump didn't seem to care much about the severity of the epidemic. Although the Federal Reserve lowered the interest rate by 50 basis points initially then another 100 basis points, the effect was limited. Earlier, President Trump had mentioned deductions on some personal taxes, but he did not declare more aggressive financial policies.  He announced a one-month suspension of European flights but excluded Britain and Ireland. On the whole, Mr. Trump underestimated the impact of the epidemic, which we think is one of the factors that caused apprehension among global investors. Nevertheless, Mr. Trump was finally aware of the severity of the situation and declared national emergency to provided $50 billion in federal funds to fight the epidemic and Federal Reserve also launched a $700 billion quantitative easing program.

 

The epidemic has exploded in Europe. German Chancellor Angela Merkel said that if the epidemic should get out of control, 70 percent of people in Germany might be infected!  If that is the case, other European countries are likely to experience the same crisis.  Giving the frequent exchanges and contacts among the European and American people, an epidemic explosion in the United States cannot be ruled out. By that time, the impact on the United States cannot be underestimated. Moreover, the United States is the leader of the global economy and the stock market, which are bound to be hard hit again!  In any event, as the global epidemic is still spreading rapidly, we are afraid that the economy and the stock markets are likely to fluctuate sharply. Governments and investors need to respond cautiously.

(Lin Chu-Chia is a professor of economics at National Chengchi University.)

 

From: https://udn.com/news/story/7339/4414942

Second Charter Flight under China’s Lead and Taiwan’s Non-Transparency

By Zhao Jian Min
United Daily News, March 14, 2020

The 361 Taiwanese who were stranded in China’s Wuhan finally returned to Taiwan on March 11. The ruling Democratic Progressive Party (DPP) used the name of “party personnel” to make claims in the media, condemning China’s constant underhanded actions, and praising the government team for “making the Chinese authorities unwillingly accept Taiwan's two priority principles."

 

However, cross-strait charter flights involve bilateral negotiations. Was there an agreement signed? Who is representing our side in the negotiations? Where are the discussions being held? What have been discussed? These are major issues, yet the related government agencies have not operated in a transparent way. Judging from the messages seen, the key issues that made the chartered flight possible, such as cross strait collaborative flight and passenger lists have all been dominant by the mainland.

 

There are five main questions regarding the chartered flight this time: First, which side first gave in in order to have made these chartered flights possible? According to media reports, under pressure, Mainland China finally revealed last week to SEF through Taiwanese business men that they agreed to let China Airlines and China Eastern Airlines fly respectively, and confirmed the flight times on March 8. The media even said Xi Jinping visited Wuhan on March 10, judging that the chartered flights were Xi’s order. However, the Taiwan Affairs Office of Hubei Province stated on March 10 that Taiwan agreed on March 7 to work together on the cross-strait flights. On March 8, Mainland China worked overnight and compiled a list of 407 passengers, but Taiwan rejected the proposed waiting list of 30 people. Who exactly gave in? Did high-level officials of mainland China step in?  The government should explain.

 

Second, the problem of means of communication. In response to the second chartered flight, Premier Su Tseng-chang proposed four conditions on February 6th, one of which was government-to-government negotiation. Our news outlet reported that China’s messages to the Straits Exchange Foundation (SEF), Mainland Affairs Council (MAC), and other agencies were passed through Taiwanese businessmen on the mainland. However, Xinhua News Agency reported on February 27 that China had communicated through the cross-strait civil aviation channel the previous day, suggesting a joint flight with China Airlines and China Eastern Airlines and was rejected by Taiwan. The two sayings are different, but both prove that our government had no room to speak.

 

Third, which airline should carry out the mission? We originally insisted that China Airlines would assume sole responsibility for the chartered flights, for ease of management. Taiwan media stated that through Taiwanese business men, China expressed to the SEF that they agreed to China Airlines and China Eastern Airlines flying together. However, Xinhua News Agency reported that on February 7, China proposed that China Eastern Airlines be responsible for four flights, carrying 900 Taiwanese passengers back to Taiwan, but Taiwan did not agree to this. On February 26, China once again, through the cross-strait civil aviation communication channel, proposed for China Airlines and China Eastern Airlines to fly together instead. On March 7, Taiwan maybe realized that Wuhan’s closure may soon come to an end, and can no longer stop Taiwan nationals from returning to Taiwan, they finally agreed to China’s proposal to fly together.

 

Fourth, how was the list Taiwanese passengers decided? Regarding the second chartered flight, Taiwan proposed three principles, that is, to properly prevent epidemics, to discuss priority list of return passengers with Taiwan, and Taiwan to make quarantine preparations. Hubei Province’s Taiwan Affairs Office claimed that the list of 407 people was completed overnight on March 8th. The plan was to carry 202 people on China Airlines and 205 people on China Eastern Airlines. However, 46 could not board the flight due to fevers and other issues. In the end, a total of 361 people returned to Taiwan. According to the MAC, a priority list of 121 people was submitted to China through the SEF on February 7. There are two questions involved here: Does the list from China include the 121 people priority list from the Taiwan side? Was there a negotiation between the two sides?

 

Finally, the problem of how to execute epidemic prevention for charter flight personnel. Using a Taiwanese airline for the flight, a passenger list created by Taiwan, and the need to prevent the epidemic are our three main principles. The "Yokohama model" the president insisted on refers to the list decided by us and medical personnel on flight. However, how do the medical personnel on flight leave the plane to conduct epidemic prevention measures and whether passengers should wear protective clothing, caused serious arguments between the two parties at the airport. Finally, the passengers decided themselves whether to wear protective clothing.

 

In conclusion, one can see the unique characteristics of the charter flights this time:

1. Important issues, such as cross strait joint flights, communication channels, return passenger list, etc. was led by China.
2. The negotiation channel was not open, on key issues such as whether and how to conduct epidemic prevention, there was no consensus between the two sides, causing chaos at the scene.
3. We could not hold on to our persistence, hence refrained from making remarks.

The DPP administration has set high-standard restrictions on cross-strait exchange, reversed five national security acts and enacted an anti-infiltration law, and during the presidential campaign severely condemned the rival candidate’s visit to China’s Hong Kong Liaison Office . However, the close cross-strait encounter right after the campaign this time demonstrated that China take the lead, lack of transparency from Taiwan, and silence of the opposition party.

 

The lack of consistency from the ruling party and the incompetence of the opposition party explain the results of the presidential campaign!

 

From: https://udn.com/news/story/7339/4414953

Taiwan's Academia Sinica developed within 19 days antibodies to rapidly detect the novel coronavirus.
(Photo from: China Times)

March 8: The Academia Sinica successfully synthesized a single antibody group that can recognize the protein of the novel coronavirus (SARS-CoV-2) and may be used as a key agent for rapid screening. If future mass production is successful, screening results may be obtained in as little as 15 to 20 minutes. Nucleic acid testing currently takes an average of four hours and requires special equipment.

March 11: The second group of 361 Taiwanese citizens returned from China’s Wuhan. The passengers were sent to three quarantine locations for inspection, and all of them were tested negative for the novel coronavirus.

March 13: The Legislative Yuan passed a special stimulus budget of NT$60 billion (about US$2 billion) proposed by the Executive Yuan to respond to the coronavirus pandemic. The business community has criticized the stimulus plan as not ideal and called instead for tax cuts, including postponing corporate income tax for half a year and extending from the epidemic prevention budget a 5% tax refund on undistributed earnings.

March 14: Three new people have been diagnosed with the coronavirus, and all of them had entered Taiwan from Europe. The Central Epidemic Command Center announced that the travel advisory would be raised to a third-level “warning” for 27 countries, including Schengen countries in Europe, the United Kingdom, and Ireland, as well as the United Arab Emirates. Taiwanese passengers should avoid traveling to these countries.

March 14: The Executive Yuan ruled Taichung’s Autonomous Act for Coal Regulation invalid for conflicting against the national air pollution law, stirring widespread controversy. The regulations were stipulated by the Minister of Transportation and Communications Lin Chia-lung, who is affiliated with the ruling Democratic Progressive Party (DPP) when he served as Taichung mayor. But now Mayor Lu Shiow-yen has been stopped by the Executive Yuan when she came to administer the law. The DPP’s campaign to ban coal and reduce carbon has been criticized as hypocritical.