Stock investors received early red envelopes yesterday as the local bourse gained significantly on the last trading day before the upcoming Lunar New Year holiday.
The TAIEX yesterday closed up 80.24 points, or 1.25 percent, at 6,532.18 on turnover of NT$79.08 billion (US$2.47 billion). Institutional investors, including overseas ones and local brokerages, collectively bought a net NT$8.23 billion worth of Taiwanese stocks yesterday, according to Taiwan Stock Exchange statistics.
"The benchmark index rebounded as the selling pressure eased off, following the strengthening performances of international markets," Yu Huei-ling (于蕙玲), president of Jih Sun Securities Investment Trust Co (日盛證券投信), said yesterday.
The drops in the TAIEX over the past few days actually presented a nice chance for investors to buy some undervalued stock, Yu said.
The local bourse was dragged down along with other Asian markets after news broke of the corporate scandal at Japan's Livedoor Co, as well as weaker-than-expected financial reports from Intel Corp and Yahoo Inc. The TAIEX plunged 212 points last week.
The TAIEX close yesterday represented a 0.25 percent decline compared with its closing level of 6,548.34 at the end of last year, according to the stock exchange. However, this level represents a rise of 8.25 percent from the closing level of 6,034.60 points at the end of the year of the monkey (this year is the year of the rooster).
Looking ahead, the local bourse may enjoy a short-lived bull run, boosted by the so-called red-envelope market sentiment when the stock market resumes trading on Feb. 3 following the Lunar New Year holiday, said a fund manager at Invesco Taiwan Ltd (
Risks like foreign-exchange losses caused by the strengthening NT dollar, high prices of raw materials and growing chipset inventories, which are all likely to dent local high-tech companies' profitability, could drag on the stock market, with the TAIEX expected to fluctuate between 6,000 points and 6,600 points in the first quarter, he said.
Meanwhile, Morgan Stanley's chief Taiwan strategist Dickson Ho (何資文) said in a report released yesterday that he expected the government's unclear China policy, a correction in the tech sector caused by slow seasonality, currency appreciation and profit-taking pressure to limit the near-term upside in the stock market.
It will be difficult for sectors like the financial, hotel, retail and property industries to find the necessary leverage to perform before the Democratic Progressive Party (DPP) sets the final tone for cross-strait policy, Ho said.
The DPP may host an internal debate on cross-strait policy in the wake of one of the party's factions expressing a differing view on President Chen Shui-bian's (陳水扁) announcement of a change in China policy in his New Year speech. This surprised the market, which had expected to see further relaxation of cross-strait controls.
Morgan Stanley listed four events as the touchstones of whether the cross-strait relationship is heading toward liberalization or going nowhere: allowing Chinese tourists to visit Taiwan, setting up regular charter fights for both passengers and cargo across the Taiwan Strait under negotiation with China, allowing semiconductor assembly and testing companies to invest in China, and lifting the investment cap past 40 percent.