- The Washington Times - Tuesday, March 14, 2000

TAIPEI, Taiwan The stock market suffered its largest one-day slide in history yesterday after the governing Nationalist Party fanned fears of economic collapse if a pro-independence candidate wins Saturday's presidential election.

It was the latest evidence of parties in the closely contested three-way race seeking to gain advantage from Chinese threats to invade the island if it moves toward declaring independence from the mainland.

The market dive, aggravated by weakness in markets across Asia, saw the main index fall by 617 points in a day, the most ever, or by a decade-high 6.55 percent.

The battering began with newspaper reports quoting outgoing President Lee Teng-hui, who told a Sunday night rally the market would lose two-thirds of its value if pro-independence candidate Chen Shui-bian was the winner on Saturday.

Mr. Chen, candidate of the Democratic Progressive Party (DPP), charged in response that Mr. Lee was deliberately "killing stocks to win votes" for the Nationalist Party candidate.

Market analysts said they believed the Nationalists had not only tried to panic the market with Mr. Chen's speech, but had worked through companies it controls to initiate the huge sell-off.

"It isn't a real market. It's easy to manipulate," said Chen Ming-tong, a professor of political science at National Taiwan University.

A market analyst who asked not to be identified said the biggest question at this point was how long the party would continue to sell.

The Nationalists, at risk of losing power in Taiwan for the first time since they came to the island in 1949, had already been accused of trying to exploit a series of belligerent threats from Beijing.

The party is widely believed to be behind a privately funded television ad that features footage of Mr. Chen calling for independence, followed by scenes of young men marching off to war against China.

The sell-off may well have been exacerbated by market losses across Asia.

But Taiwan's economy has been the most resilient in the region, sustaining brisk 5 percent annual growth while other Asian economies were melting down in 1997 and 1998.

Taiwan residents play stocks with a passion that seems more suitable to betting on horse races than investing in their nation's future.

Brokerages include huge galleries for day-traders. Instead of reading magazines while waiting for a doctor, patients spend their time staring at screens of stock indexes in hospital waiting rooms.

Within minutes of yesterday's opening bell, the market plunged hundreds of points, with many stocks hitting their maximum allowed fall of 7 percent per day. Shares of healthier companies followed them down through the session.

As soon as the market closed, the recriminations began flying. A DPP spokesman accused the rival Nationalists of orchestrating the sell-off in a deliberate attempt to smear its candidate.

Undaunted, the Nationalists' vice-presidential candidate, Vincent Siew, told voters that both society and the stock market would stabilize if his party won the election.

"Everyone can make big money," he said.

Suspicions were widespread among voters and stock analysts that companies with long-standing ties to the Nationalists started dumping stock in an attempt to start a panic that would drive voters away from Mr. Chen.

"It's a dirty trick. They do it all the time," said Shen Quin-lin, 51, who owns a sheet-metal shop next to one brokerage. "They're just trying to scare voters."

A few analysts suggested the sell-off had created a perfect opportunity to buy stocks.

"It's a bargain right now," said John Brebeck, an analyst at Jardine Fleming Securities. "No matter who wins the election, the worst-case scenario is already reflected in the index."

Taiwan's market previously went into a free fall in 1996 after China lobbed missiles into shipping lanes off the island in a bid to influence the outcome of that year's presidential election.

The saber-rattling prompted Taiwan to set up a $7 billion stock-stabilization fund, in which the government could buy shares to prop up a sagging market.

The effort, which was generally considered a success, spawned plans for another fund of twice that size for the present campaign. But politics foiled the effort, with two opposition parties boycotting a panel that would supervise the stock purchases.

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