Mon, Jan 24, 2000 - Page 18 News List

TAIEX in pre-holiday limbo, but OTC skyrockets

Electronic stocks were fairly stagnant last week, though the companies that make styrene monomer did well on the back of rising spot prices

By Michael Logan  /  STAFF REPORTER

A lack of news to drive investors' interest and the anticipation of consolidation ahead of the Chinese New Year holiday conspired to keep the market under wraps last week.

After climbing 3.9 percent in the Jan. 10 to Jan. 15 period, the TAIEX edged up slightly last week to 9,255.94, or 0.7 percent higher. But the Over-the-Counter index put in a sizzling performance, rising 3.5 percent last week to 234.85.

"There wasn't too much news in relation to electronics counters, and that's why you haven't seen much movement," said Naiwen Kerr, assistant vice president of Taiwan International Securities.

As a result, "Some non-electronics companies have had a chance to perform," Kerr said. He noted that turnover in electronics had fallen to between 62 percent and 65 percent of the market's total last week, compared to 70 percent in the previous week.

Investors turned their interest to companies such as President Chain Store (統一超商), which rose 5.2 percent to NT$141; Far Eastern Textile (遠東紡織), which rose 7 percent to NT$76; Pacific Electric Wire and Cable, which rose 4.6 percent to NT$24.80; and Taiwan Cement (台灣水泥), which rose 12.1 percent to NT$37.80.

But while none of the aforementioned companies are technically considered high-tech firms, they are considered technology plays for their telecom holdings or -- in the case of President -- for its e-commerce ambitions.

Grace Li, research manager of MasterLink Securities, said investors have been focusing on the government's cautious approach to the stock market's recent gains. Of particular concern is the actions of China Development Industrial Bank (中華開發工業銀行), which has been paring back holdings.

"People always take the company's actions as one of the important factors to watch," Li said.

She said CDIB could be selling "so they can realize their gains." Also, the selling may be a warning that stocks are appreciating too fast. "They want the market to watch their actions, to get the hint," Li said.

Still, foreign institutions have continued buying, and "that's important for investors' confidence," Li said. Last week, foreign institutional investors bought a net NT$12 billion in shares. For the year, these investors have been net buyers of NT$27.3 billion in shares.

Li also noted that petrochemical firms continued to perform well, despite periodic bouts of profit-taking. "Stock prices are expected to trend up in the weeks to come," she said, "so that gives investors the confidence to hold."

Spot prices for styrene monomer soared to about US$815 a ton last week, up from US$710 earlier in the month. The steep rise has benefited Taiwan Styrene Monomer, which rose 13.4 percent last week to NT$59; and Grand Pacific Petrochemical, which rose 19.9 percent to NT$30.1. For the month, the companies are up 34 percent and 46.8 percent, respectively.

Also benefitting was Formosa Chemical and Fiber Corp (台化), which rose 8.1 percent to NT$43.70 last week. The company in March will likely start styrene monomer production at a second unit in Mailiao, Yunlin County. The new unit will add 250,000 tons of annual production capacity, bringing Formosa's total to 450,000 tons per year.

In the coming week, Kerr said, the TAIEX could trade between 9,000 and 9,500, and possibly in the tighter range of 9,000 and 9,350 if liquidity dries up. As the Chinese New Year approaches, the demand for cash for bonuses and red envelopes will increase, leaving less money for stock purchases.

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