The stock market should be able to build on the recent 15 percent upturn as SARS appears increasingly under control and expectations of a pick-up in the US economy underpin investor confidence, analysts said.
They said foreign investors in particular have shown an increased commitment to the market, drawing encouragement from Wall Street's advance above the key 9,000 points level.
"I expect the Taipei market to rise to 5,400 points over the next three months and challenge 6,000 points by the end of this year," said Steven An, chief investment officer with UBS Global Asset Management Taiwan.
"I am optimistic about the Taiwan market. Foreign buying is expected to lead the gains," An said.
The local market has risen more than 14 percent to 4,740.45 points on a rebound from a year-to-date low of 4,139.50 posted on April 28 as the country grappled with the outbreak of SARS.
Taiwan Saturday said it remained determined to request the World Health Organization lift a travel warning on the island despite several new SARS infections at a local hospital after almost a week of no new infections.
Last month, the government cut this year's economic growth forecast to 2.89 percent from the previous estimate of 3.68 percent, citing the impact of SARS on the economy.
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At the same time, Wang was cautious on the outlook for the US economy and equity markets, calling for careful investment strategies from investors here and urging them not to chase local share prices merely on the recent gains on Wall Street.
"US jobless claims are still on the rise with the jobless rate remaining at the highs. There is little sign that the US economy will have a quick turnaround. Don't count on Wall Street completely," Wang said.
The US unemployment rate rose to a nine-year high of 6.1 percent last month from 6.0 percent the previous month as businesses axed 17,000 jobs, the government announced Friday.
KGI Securities (中信證券) economist Hermes Yang (楊聖璋) said that with SARS apparently on the wane, he is likely to upgrade this year's forecast for Taiwan's GDP growth of 1.6 percent.
Yang had previously put GDP growth at 2.6 percent, but cut it given the impact that SARS was having on the economy.
"Now, there are high hopes that the impact will be short-term," Yang said, adding, however: "I do not think the local economy will stage a significant comeback."
In April, Taiwan's key export orders, hit by SARS, rose at an annualized rate of 4.56 percent compared with a growth rate of 10.17 percent, reflecting the impact of SARS and the Iraq war.
Yang said it was possible that the April figures simply reflected the impact of Iraq depressing US demand but noted: "I need more hard evidence to conclude that there is a solid fundamental improvement in the US."
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