Stocks surged to their highest level in five weeks, driven by the continuous injection of foreign capital, rebounding flat-panel stocks and the formal reweighting announcement by Morgan Stanley Capital International Inc (MSCI), analysts said yesterday.
The TAIEX yesterday jumped 117.83 points, or 1.99 percent, to close at 6,028.68, its highest finish since Oct. 12.
Turnover doubled to NT$106.99 billion from NT$55.9 billion on Tuesday.
"The constant foreign capital inflow essentially helped boost the bourse [to breach the 6,000 point mark]," said Alan Tseng (曾炎裕), a vice president at Capital Securities Corp (群益證券).
Foreign institutional investors purchased a net NT$11.3 billion yesterday alone and have poured NT$103 billion into the local bourse so far this month, according to Taiwan Stock Exchange Corp.
Yesterday's rally was also boosted by panel-related stocks, following LG Philips LCD Co's forecast of a tightening supply of large-size panels in the second quarter of next year, Tseng said.
Meanwhile, Morgan Stanley Capital International Inc (MSCI), yesterday formally announced it was reweighting Taiwan's representation in its benchmark.
Currently, Taiwanese companies have about 55 percent of their market value represented in MSCI indexes. The MSCI will raise that ratio to 75 percent at the close of trading on Nov. 30 and to 100 percent on May 31 next year.
"The announcement is evidence of foreign investors' recognition of Taiwan's stock market's fairness, efficiency, transparency, legal system and investor protection," the Financial Supervisory Commission said in a statement.
The commission said that such a change will help draw long-term investment by foreign capital to further propel the local bourse and economic development.
The market focus also shifted from electronics shares to brokerages, after MSCI also announced the inclusion of Yuanta Core Pacific Securities Co (元大京華證券), the nation's largest brokerage, in its indexes.
Yuanta shares leapfrogged 5.9 percent to close at NT$25.20.
Analysts said that brokerages', led by the Chinese Securities Association (券商公會), resumption of issuing share warrants yesterday -- after a Taipei court ruled that a 25 percent tax on warrant transactions was unfair -- also brought positive momentum.
Wu Pei-wei (吳佩偉), a portfolio manager who manages a US$30-million fund for ABN-AMRO Asset Management in Taipei, said finance stocks would be a mainstream, considering sound fundamentals and the government's policy and efforts to improve and internationlize the nation's finance sector.
Taiwan Cooperative Bank (合庫) shares -- which debuted yesterday -- rose by the maximum 7 percent daily limit to close at NT$17.90.
Wu optimistically forecast a rosy outlook for the local bourse, predicting the TAIEX could see a constant upward momentum to boost its benchmark as high as 6,500 by the end of this year
"The continual foreign capital inflow and MSCI's weighting change will both benefit the local bourse," Wu said.
The increasing likelihood that the Democratic Progressive Party will win a legislative majority in next month's legislative elections could boost the TAIEX as well, he said.