Political factors that have kept affecting the local bourse in the past months have come to an end following President Chen Shui-bian's (陳水扁) inauguration yesterday, analysts said yesterday.
In light of sound fundamentals of the nation's industries, the outlook for the stock market remains rosy in the long run, they said.
With the absence of expected celebratory bulls, TAIEX dropped slightly by 45.25 points, or 0.77 percent, to close at 5,815.33 yesterday. Turnover was NT$109.3 billion.
The benchmark index plunged by over 400 points, or 3.18 percent, on the inauguration day four years ago.
"President Chen's speech didn't surprise most investors. It neither offered any bullish incentives to the stock market yesterday," said Wu Peiwei (吳佩偉), a portfolio manager who helps oversee a NT$600-million fund for ABN-AMRO Asset Management Taiwan Ltd.
The selling pressure thus came from investors who reaped profits from a rebound of 302 points on TAIEX on Wednesday, Wu added.
Other investors echoed, saying that the local bourse should be able to leave the non-economic influences behind and did not think the ballot recount could do harms to the stock market.
"Political factors have come to an end following President Chen's inauguration yesterday," said Calvin Chen (陳程坤), a manager at Yuanta Core Pacific Capital Management (元大京華投顧).
But the local bourse may still be weak along with international stock markets in the near future, ailed by influences such as an expected rise in interest rates, skyrocketing oil prices and the unrest in Iraq, Chen said.
Selloffs by foreign investors may not ease until the time and scale of a rise in interest rates in the US becomes clear next month, he added.
Foreign investors, who dumped a net of NT$4.4 billion worth of shares yesterday, have got rid of a net of NT$125.05 billion of Taiwanese shares since April 27, according to Taiwan Stock Exchange statistics.
George Wu (
The positive stance that the incoming economic affairs minister holds on the opening up of local companies' investment in China would help improve foreign investors view of the local bourse, he said.
"We are confident about the stock market's prospects, which has hit bottom at around 5,400 points," Wu added.
The TAIEX closed at 5,482.96 points on Monday after hitting as low as 5,450.72 in the mid-session, following a harsh statement from Beijing about President Chen.
For investment targets in the next half of this year, both Wu and Calvin Chen recommended electronics shares and China-related shares for the second half of this year and suggested investors avoid raw materials shares.
Financial shares could be a good investment, in light of benefits expected from a rise in interest rates, if the amendment to financial restructuring fund regulations is passed, Calvin Chen added.
However, ABN-AMRO's Wu was not as bullish, saying that economic performances in the Asian region may be weakening following China's clampdown measures.
Foreign investors' benefits from capital gains and exchange rates in the region could be shrinking accordingly and, thus, may not be as keen on Asian markets as before, he said.
The bourse could be influenced be such factors and its outlook dampened as a result, Wu added.
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