Electronics shares bolster TAIEX

The stock market this week is likely to pull back to the psychologically important 6,500 level, as investors turn cautious over the political clash and the blackout in the nation's Silicon Valley over the weekend, market watchers said yesterday.

But electronics shares are likely to buck that downtrend as the nation's economic pillars will continue to take their cue from the tech-laced NASDAQ composite index, said Kevin Chung (鐘國忠), a deputy manager at Jih Sun Securities Investment Consulting Co (日盛投顧).

The NASDAQ is widely predicted to be buoyed by strong first-quarter financial results from tech-heavyweights including Intel Corp, International Business Machine Corp and Texas Instruments, he added.

"The TAIEX, however, is highly likely to drop as jittery investors, especially overseas fund managers, stay on the sidelines, or even book profits in response to the weekend's political conflicts over the surprising presidential results and the costly power outage in the Hsinchu Science-based Park (新科科學園區)," Chung said.

An initial inquiry showed that the losses caused by Saturday's power outage will be larger than average compared to losses in past blackouts, Randy Yen (顏宗明), the spokesman of the science park administration, told the Taipei Times yesterday.

Yen, however, said there are no specific numbers yet.

Bellwethers Taiwan Semiconductor Manufacturing Co (台積電), United Microelectronics Corp (聯電) and AU Optoelectronics Corp (友達光電), the nation's biggest crystal-display maker, are among the handful of companies affected by the worst power failure in about three years.

"Though the political conflicts seem manageable, the uncertainties could trigger a profit-taking sale after the equity market has rebounded for two straight weeks since the presidential elections," Chung said.

But the decline could end up being modest if the index is seen to be bolstered at the psychologically important 6,550-point mark, Chung predicted.

The benchmark TAIEX closed higher last week, up 74 points, or 1.14 percent, to 6,620 points from 6542.54 points last Monday. During the week, turnover was light at about NT$631.54 billion, the lowest level in the past three weeks, according to the Taiwan Stock Exchange Corp (台灣證券交易所).

In the second half of this week, Chung predicted electronics stocks with solid fundamentals will be the focus of buying as flat-panel shares and dynamic-random-access memory (DRAM) stocks remain investors' favorites.

Justin Lin (林友銘), a market analyst at MasterLink Investment Advisory (元富投顧), also thinks the political instability could stifle market sentiment in the first three trading days.

"But the negative impact will be short-lived as the violent rallies are already contained. And they [the opposition] are still one month away from their next demonstration on May 19," Lin said. "Prior to that, healthy first-quarter financial results from electronics companies will more or less offset the selling pressure."