Analysts predict stock prices to rise

The stock market may move higher as trading resumes after the Lunar New Year holidays, as better-than-expected US stock markets and optimism about political tensions may boost investors' confidence, analysts said yesterday.

Political uncertainty and the implementation of a new accounting rule that requires Taiwanese companies to disclose potential asset impairment stemming from long-term investments, or decreased goodwill from mergers, put investors on the sidelines ahead of the holidays, they said.

But the cloud almost lifted after the appointment of new Premier Frank Hsieh (謝長廷) and landmark direct flights across the Taiwan Strait.

"With those concerns removed, Taiwan's stock market should perform better, reversing the disappointing performance in January," said George Wu (吳裕良), a portfolio manager who manages the equivalent of US$31 million for Invesco Taiwan Ltd (景順投信) in Taipei.

"There's a strong probability for the stock market to reopen higher," Wu said.

On top of the non-economic factors, Bill Lan (藍新仁), a fund manager who oversees a NT$5 billion fund for Jih Sun Securities Investment Trust Co (日盛投信), said the benchmark TAIEX would move higher, taking its cue from the US stock markets.

Given the lack of bearish news emerging at home during the long holidays, Lan said the performance of the US markets was a key factor that would affect the local bourse in the new trading session.

"The US stock markets have exceeded our expectations during the past week," Lan said.

The blue-chip Dow Jones industrial average rose 0.75 percent last week on a four-year low in first jobless claims.

The Standard & Poor's 500 index finished up 0.20 percent for the week and the NASDAQ ended down 0.48 percent.

"That gives us confidence that the TAIEX will rebound in the middle term because of improvements in the political arena and in the industrial area," Lan said.

With more indicators for an industrial upcycle in the second quarter, Lan suggested investors buy foundry companies and thin-film-transistor liquid-crystal-display panel suppliers.

Lan expected the TAIEX to bounce back in the range between 6,100 points and 6,400 points by the end of this month. The index inched 0.26 percent to 6034.6 points on Feb. 3, the last trading day before it closed for the Lunar New Year holidays.

As for other uncertainties that could hurt the local bourse, Lan said the new accounting rule will continue to cap the share prices of companies with more long-term investments, or underlying losses from mergers. But these influences were weakening, he said.

But pressure on the bourse may mount in March as the Chinese authorities are set to take up the anti-secession law at the National Peoples' Congress in an attempt to head off any declaration of independence by Taiwan, Lan said.