Despite the first US government shutdown in 17 years, most foreign institutional investors say they don't think news of a shutdown will roil Taiwanese shares because of market losses in previous sessions.
However, Vice Minister of Economic Affairs (MOEA) Cho Shih-chao indicated that a prolonged shutdown of the US government could have serious effects on world economies, including that of Taiwan. He added that the government is keeping a close watch on how the situation is developing.
The US government shut down on Tuesday as Republicans and Democrats failed to reach compromise in a series of budget negotiations, but upbeat regional economic data softened the potential blow to Asian markets.
The TAIEX yesterday closed up 13.15 points, or 0.16 per cent, at 8,187.02, outperforming the Vietnam and Hong Kong stock markets, the only two exchanges which registered losses in yesterday's trading.
Taiwan-based foreign investment analysts believed that the US government shutdown is not news and that American politicians have been able to find some middle ground to resolve similar crises in the past.
Factors including economic, business and unemployment indicators as well as shifts in US bond-buying policy weigh much more heavily in market performance, analysts told the Central News Agency.
Analysts added that the US government shutdown is not nearly as menacing to the markets as a predicted standoff on the debt ceiling, the deadline for which will arrive on Oct. 17.
Regarding the impact of a US government shutdown, Cho Shih-chao said the magnitude of its effects will depend on the duration of the funding deadlock. Cho pointed out that local industries, including public construction, service and consumer goods, will bear the brunt of the economic effects of a US government shutdown.
The key source of uncertainty is the impact on business and consumer confidence. "The more drawn out this is, the worse the impact is likely to be," Cho said.