Investors worldwide last week sold off stocks -- especially technology shares, which had flown to Icarus-like heights last year -- as the prospect of higher interest rates made owning tech companies seem expensive.
Yes, Y2K was a non-event, and the absence of bugs was cause for celebration. But concerns over Y2K had prevented the US Federal Reserve from hiking rates in December, and now its board looks prepared to raise rates next month.
The NASDAQ Composite Index fell 4.6 percent last week, and much of the world followed.
The lone standout, however, was Taiwan. After finishing 1999 at 8,448.84, the TAIEX climbed 4.7 percent last week to close at 8,845.47. Since Dec. 21, the index has soared 13.6 percent. The Over the Counter (OTC) index finished the week at 217.35, up 4.9 percent.
"The [Taiwan] market didn't rise as much as the NASDAQ [last year]," said Grace Li, research manager at investment house MasterLink Securities. Therefore, she said, the TAIEX had less reason to fall.
Whereas the NASDAQ Composite Index skyrocketed 85 percent in 1999, the TAIEX rose by just 31.6 percent.
In addition, the TAIEX's weighting consists mostly of high-tech manufacturing companies, such as Taiwan Semiconductor Manufacturing Company (
Still, there are some concerns that the NASDAQ could pull the TAIEX lower this week, as was the case in Hong Kong and Japan.
While local retail investors were buying last week, foreign institutions were selling -- dumping a net NT$4.7 billion in shares. Trading by foreign investors will be closely watched this week, as their actions could be an indicator of the market's strength or weakness.
Jan. 7 share price: NT$42.30
Shares outstanding as of 07/99: 3.2 billion
Estimated 2000 earnings per share: NT$2.162
Estimated 2000 price-to-earnings ratio: 19.56
"This week will be an important one to watch," Li said. "We'll see if the TAIEX can sustain its upward momentum."
Still, Li said the TAIEX is not likely to fall below 8,600, and that the market's near-term prospects looked good.
"There are two different market views. One is that the market will take a rest in the next month or two," Li said.
The other view -- which Li supports -- is that Taiwan stocks will trend higher on strong earning's prospects for this year. Li sees the TAIEX trading between 8,600 and 9,000 this week and hitting 9,600 on or around Chinese New Year.
The market's bright spots include DRAM makers, which have been benefiting from higher-than-expected chip prices. According to the American IC Exchange, the benchmark 64 Mbit DRAM traded between US$8.85 and US$9.38 as of Jan. 7. That's significantly greater than the US$6 many analysts had expected DRAM chips prices would fall to after reaching highs of around US$20 in October. It's also up from a price range of US$8.53 to US$9.04 per chip on Dec. 23.
"Windbond is a strong buy," Li said. "Again this week we witnessed higher than expected spot prices."
MasterLink forecasts Windbond could reach between NT$100 and NT$120 per share in the long term.
The company rose to NT$81 last week, or 8.7 percent higher than its Dec. 28 close. Winbond shares have climbed 47.2 percent since Dec. 9.
Powerchip Semiconductor finished at NT$63, up 8.6 percent for the week; Mosel Vitelic at NT$57, up 14 percent; and ProMos Technologies at NT$102, 6.8 percent.
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