Fri, Mar 04, 2005 - Page 10 News List

Analysts brush off TAIEX's slight dip

OPTIMISTIC Rising political risk related to China's proposed `anti-secession' law should be offset by increased foreign buying ahead of MSCI's re-weighting

By Amber Chung  /  STAFF REPORTER

An investor reads a newspaper in front of a wall of monitors showing the stock index in Taipei yesterday. Share prices closed 0.37 percent lower yesterday as bargain-hunting toward the close failed to turn around entirely early losses attributable, in part, to Wall Street's overnight weakness, dealers said.

PHOTO: AFP

Foreign analysts yesterday painted a rosy picture for the future of the nation's stock market, predicting that the benchmark index could shoot up as high as 8,000 points this year, despite the growing political uncertainty that clouded the local bourse yesterday.

The TAIEX closed down 22.87 points, or 0.37 percent, at 6,202.38, on turnover of NT$78.68 billion yesterday.

Foreign investors sold a net of NT$1.67 billion after four consecutive days of buying on concern of political uncertainty in view of the "anti-secession" law discussions in the National People's Congress -- China's rubber-stamp parliament -- that will begin sessions tomorrow.

Nevertheless, "the outlook is positive in Taiwan," said Kevin Smith, chief investment officer with ABN AMRO Asset Management Group, in a media briefing in Taipei yesterday.

Citing upward momentum bolstered by the nation's healthy fundamentals for manufacturing as well as foreign capital inflows that are expected to keep buying up, Smith said the TAIEX could reach 8,000 points by the end of the year.

The market would see the surge of foreign funds one month prior to, and after the last-staged re-weighting of the TAIEX by Morgan Stanley Capital International Inc (MSCI) in May, he said.

The re-weighting to make the stock market value fully represented in the MSCI indices could garner the local bourse as much as US$35 billion worth of funds, Merrill Lynch estimated last year.

ABN AMRO has also raised the rating of the TAIEX to an "overweight" from last year's "underweight" category after seeing some healthy corrections last year amid regulatory restructuring, ABN AMRO's chief investment officer in the Asia Pacific, Alex Ng (黃金源) said.

Taiwan's market condition is ideal for long-term investment, Ng added.

Another banking institute expressed similar positive views about the prospects for the local stock market, but the strengthening NT dollar could be the unpredictable factor in the market, said Mike Zheng (鄭明祈), president of UBS Securities Investment Advisory Taiwan.

"If the NT dollar finishes with the appreciation momentum soon, it could be the end of the upside story in the first half of this year," Zheng said yesterday.

Amid the constant foreign capital inflow, Zheng suggested local investors set their sights on big-cap stocks that can outperform volatile small-caps, as well as companies that issue cash dividends -- both of which are favorites among foreign investors, in light of their high liquidity.

Ben Lee (李柏彥), head of equity research with Nomura Securities Co's Taiwan branch, said they have re-weighted the TAIEX to "neutral" from "underweight," eyeing additional foreign exchange profits driven by the rising NT dollar.

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