QFIIs asked to be more cautious in forecasts

Taiwan's qualified foreign institutional investors (QFIIs) have been asked to be more cautious when giving forecasts regarding Taiwan stocks, according to a report yesterday in the local Economic Daily News.

Among the foreign securities firms cited in the report were: Citigroup, Merrill Lynch, Goldman Sachs, Macquarie, and BNP Paribas.

Analysts with these firms have forecasted that the TAIEX index would go up to 10,000 or above some time this year, based on their belief that Taiwan has good fundamentals.

But as it turned out, a little above 9,800 was the highest TAIEX ever got this year. The index has in fact dropped some 2,000 points over the past few months, due to Taiwan's political uncertainties and a global downturn due to the subprime mortgage crisis in the United States. Yesterday, TAIEX closed at 8,314.

Individual investors who took the foreign analysts' advice and bought shares at the wrong time have complained to the Securities and Futures Bureau under the Financial Supervisory Commission, blaming these analysts for misleading them.

Also, some publicly traded companies were also holding grudges against certain QFIIs for making "target prices" that they said did not necessarily reflect the reality.

The Securities and Futures Bureau took these issues very seriously. It recently sent a letter to the Taiwan Securities Association and asked members to exercise restraint, the paper said.

The association then had a meeting with its foreign securities firms members, who were asked to be more cautious while making forecasts.

Since the meeting, many QFII analysts have become silent, fearing they might lose their job, the report said.

"Although the government did not directly talk to us, we still felt pressure after the moral suasion given to us by the securities association," one QFII head was quoted by the paper as saying.

The Taiwan Securities Association also suggested that the Taiwan Stock Exchange Corp. and the GreTai Securities Market strengthen their monitoring of remarks, analyses or forecasts made by institutional investors.

QFIIs, as a matter of fact, were not the only ones who forecasted that the TAIEX would exceed 10,000. President Chen Shui-bian and Democratic Progressive Party presidential candidate Frank Hsieh have both made similar calls on many occasions.

Chen, for example, had once said that "TAIEX reaching 10,000 is not a dream."