Foreign capital expected to boost TAIEX

The nation's bourse, which has been one of the most popular in Asia among foreign investors in the first half of this year, is expected to see its benchmark index reach an annual high in October, bolstered by the continuous inflow of overseas capital, market watchers said yesterday.

Foreign investors have been pumping money into the local stock market following Morgan Stanley Capital International's two-phased reweighting of the local bourse that ended in May, Charlene Wu (吳淑婷), vice president of the fund management department at JF Asset Management Taiwan Ltd, which is part of JP Morgan Asset Management, told a media briefing yesterday.

"We expect to see the amount of foreign investment doubling this year from around US$8 billion last year," Wu said, citing driving forces including the high liquidity of the Taiwanese market, the increasing issuance of cash dividends and a national dividend yield rate of 4.7 percent, the highest in the region.

Foreign investors poured some US$11.7 billion into the local bourse from the beginning of the year until Aug. 3, the highest amount in Asia, and they are expected to inject another US$4.3 billion into the Taiwanese market this year, according to JF Asset Management.

Foreign investment is likely to boost the technology stock index by 10 percent to return to levels last seen before the presidential election in March last year, Wu said.

As a result, the TAIEX may well edge up by 5 to 7 percent from its current level in the traditionally busy fourth quarter, mostly likely in October, the analyst said.

Analysts Hua Nan Investment Trust Corp (華南永昌投信) said that they expect a peak in the second half of this year, bolstered by the inflow of money driven by the likelihood of a further revaluation of the Chinese yuan, the possible upgrade of the local stock market to developed-market status by the British FTSE Group next month, and optimistic forecasts by the nation's electronics companies.

Nevertheless, skyrocketing crude oil prices could undermine the rosy expectations if more retailers follow the US retail giant Wal-Mart Stores Inc in expressing concern over weakening consumer spending as a result of high oil prices, Wu said.

Investors set their sights on tech stocks, especially the liquid-crystal-display (LCD) sector, ranging from the upstream flat-panel makers and leading IC manufacturers to downstream assemblers and distributors, with the demand for LCD TVs expected to take off next year, JF Asset Management's managing director George Hou (侯明甫) said.

The fund management house predicted that shipments of LCD TVs could double to 40 million units next year.

Betting an annual tourism income of US$490 million as a result of new Chinese tourism to Taiwan, Wu suggested putting hotel, department-store, entertainment, airline and tourism stocks in investors' mid to long-term portfolios.

The TAIEX slid marginally by 0.48 points, or 0.01 percent, to close at 6,241.92 on turnover of NT$69 billion (US$2.15 billion) yesterday. Foreign investors sold shares worth a net NT$2.06 billion.