Analysts say foreign fund managers to drive TAIEX

Technology and finance stocks on the TAIEX are expected to attract continued heavy purchasing from foreign investors ahead of the Lunar New Year, analysts said yesterday.

"Foreign investors tend to build positions in the local bourse in January after a period of relative quiet during the Christmas holidays," said Jones Wang (王源錦), a deputy manager at ABN AMRO Assess Management Taiwan.

Overseas fund managers bought a net NT$60 billion in Taiwanese shares last week, compared to an average of NT$70 billion, Wang said.

"The aggressive buying is expected to continue in the coming weeks due to widespread optimism," about a solid recovery in the semiconductor industry and Taiwan's economy, Wang said.

The government forecast that Taiwan's economy would grow at a rate of 4.13 percent this year, compared to an estimated 3.15 percent last year.

Overseas fund managers, who owned about 22.98 percent of local shares by value as of last Friday, are closely tracked by market analysts, securities regulators and investors as their actions affect the stock market's performance.

Continuing last week's strong momentum, overseas fund managers invested a net of NT$11.4 billion in local shares yesterday after their purchases hit a nearly 10-month high of NT$16 billion on Friday.

Last week, foreign investors were net buyers of some NT$103.17 billion worth of shares, with United Microelectronics Corp (UMC, 聯電), China Steel Corp (中鋼) and AU Optronics Corp (友達光電) topping their buying list.

Favorite stocks among foreign investors tend to be technology and financial heavyweights like Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), UMC and Cathay Financial Holding Co (國泰金控), in addition to transportation shares like Yang Ming Marine Transport Corp (陽明海運), Wang said.

Agreeing with Wang's view, Kevin Chung (鐘國忠), a deputy manager at Jih Sun Securities Investment Consulting Co (日盛證券), said that overseas fund managers will bet on technology and finance stocks this month, as they have in past years.

"These companies are less risky because they have more stable fundamentals, such as earnings per share, and because of their corporate policies," Chung said, adding that foreign investors are expected to shift their buying targets to traditional sectors next month.

There might be selling pressure from local investors as they generally prefer to cash out before the bourse closes on Jan. 19 to avoid any unforeseen risks. The stock market will reopen on Jan. 26 after the Lunar New Year holidays.

Between 2000 and 2003, stock prices slipped by about 2.2 percent on average after the Lunar New Year holidays, as investors tended to be cautious in new trading sessions after a long holiday, Chung said.

Wang, however, is bullish about the market's prospects after the Lunar New Year holidays, saying the market has a chance to open higher due to possible heavy purchasing by overseas investors.