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.
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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.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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