Stocks higher on optimism after China power shift

Shares ended higher yesterday, with traditional stocks gaining following the transfer of military leadership in China to President Hu Jintao (胡錦濤), analysts said.

The latest development in China rekindled hopes of improved relations between China and Taiwan, analysts said. It also boosted transport stocks due to the prospect of direct links, they said.

The TAIEX closed up 46.15 points, or 0.8 percent, at 5,864.54. Decliners outnumbered gainers 395 to 326 with 105 stocks unchanged.

Trading rose to NT$83.28 billion (US$2.4 billion) from NT$74.79 billion on Friday.

Jose Lee, an analyst at First Taisec Securities (銀證券), said apart from the smooth transfer of China's military reins, traditional stocks also benefited from worries over the financial state of some tech firms.

"Investors switched money into traditional stocks from tech issues amid worries about the market regulator's probe of some listed firms' accounting irregularities. Most of the probe targets are linked to the tech sector," Lee said.

In a report yesterday, Citigroup Smith Barney said the consolidation of China's leadership is considered positive for Taiwan as "conventional wisdom holds that Hu may prefer a more pragmatic and flexible Taiwan policy."

Citigroup expects to see a near-term rally in the nation's China-linked stocks, including transportation, industrial and raw material companies.

Among the main bourse's top gainers were cement shares, with shares in Taiwan Cement (台泥) soaring 4.6 percent to NT$18.30, and Asia Cement (亞泥) jumping 5.7 percent to NT$22.20.