Share prices rose yesterday after President Chen Shui-bian (陳水扁) on Tuesday signed a document ordering that the National Unification Council (NUC) should cease to function, bringing an end to a period of political uncertainty, market watchers said.
Shares were also boosted by the fact that China's response to the move was directed at the president, rather than Taiwan in general, traders said.
The TAIEX rose 51.76 points, or 0.79 percent, to 6,613.39. Markets were closed on Tuesday for a public holiday.
Risers led decliners 796 to 211, with 131 stocks unchanged.
Chen's plan to scrap the NUC, first mentioned in January, raised concerns over political tension with China and resulted in a 1.4 percent decline in the benchmark index between Feb. 22 and Feb. 24.
"Investors thought the political tension with China might have been priced into the main board's fall last week," said Morris Chen, an analyst at Daiwa Securities SMBC-Cathay Co (
However, yesterday's strong showing does not guarantee a rebound of investor confidence as political sentiment remains the biggest concern for share buyers, said Kuo Nai-fong (郭迺鋒), associate professor and chair of the finance department at Shih Hsin University.
"It merely reflects their slight optimism amid pessimism built up over the past month," he said yesterday during a press conference at which the latest investor sentiment index, co-sponsored by Chinese-language weekly Business Today, was announced.
The bimonthly survey, conducted between Feb. 13 and Feb. 21, interviewed 1,086 respondents who traded stocks in the past year about their prospects for the next three to six months.
The index dived to minus 64.6, a huge drop from minus 14.3 in December, "indicating that Taiwanese investors are bearish about stock investments in the near future," the report said.
Respondents listed the two most important elements bound to sway the stock market in the next two months as domestic politics (38.57 percent) and cross-strait relations (25.75 percent), followed by oil prices (9.08 percent) and foreign capital (3.21 percent).
"Since the dust about the National Unification Council has settled and the US response was less severe than expected, the public's concerns have been temporarily eased," said Andy Liang (
However, long-term investor sentiment still hinges on political, rather than economic, variables, he said.
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