Economists predict Year of the Monkey will be for the bulls

Local analysts are expecting a bullish stock market in the Year of the Monkey as an upswing in the global economy builds momentum, saying that the upcoming presidential election will only bring a short-term impact on the TAIEX regardless of its results.

"We are optimistic about the performance throughout the year," Eric Lai (賴建承), an associate manager at Marbo Securities Consultant Co (萬寶證券), said yesterday. "Although the presidential election in March is weighing on the stock market and many investors are concerned, the cloud will soon dissipate, no matter which party wins the race."

As the political influence fades away, the benchmark TAIEX may soar to over 7,000 points in the second quarter of the year, which is about a 12 percent increase from now, Lai said.

Stanley Yeh (葉德霖), an analyst at Yuanta Core Pacific Securities Corp (元大京華證券) also said the second quarter will be the best period of the year as many uncertain factors are cleared.

"We predict the benchmark will even rise to 7,500 points in the second quarter," Yeh said.

The range of the rise, however, will be influenced rather by the international economic environment than the presidential election, Yeh said.

Monetary policy -- namely the US dollar against the euro -- will have more of an effect on the market as Taiwan is an export dependent country, Yeh said. And the price of oil to be discussed in an OPEC meeting early next month will also impact the TAIEX, Yeh added.

Both Lai and Yeh shrugged off the outbreak of bird flu reported in Taiwan, saying the flu is still under control at this point.

Peter Kurz, chief executive officer of Insight Pacific Research (月涵投顧), is even more upbeat about the market, telling reporters earlier this month that he would not be surprised if the TAIEX jumps to as high as 9,000 points with the continuous inflow of both local and foreign capital.

Overseas fund mangers bought NT$81.7 billion net worth of Taiwanese shares as the stock market closed before the Lunar New Year on Jan. 16, which is a record high.

Kurz said foreign capital would pour into the local stock market mainly due to the George W. Bush administration's weak US dollar policy, which has strengthened the New Taiwan dollar and brought more foreign funds into the local bourse.

As for stockpicking tips for the year, Lai predicted finance stocks will rise in the first quarter of the year as banks finish clearing bad loans from last year, and semiconductor stocks, a main force driving up the TAIEX, will take the lead from the second quarter throughout the year as local integrated circuit makers start to ship out their products to meet rising demand.

Raw material manufacturers of plastic and chemical fibers for example are expected to see a surge in prices as a result of demands from China, Lai indicated. If the new government makes a breakthrough in direct cross-strait traffic in the third quarter, shipping and transportation stocks will be blue chips, Lai suggested.