The stock market rose for the fifth straight day yesterday as overseas fund mangers bought financial and asset-related stocks after the government loosened its grip on cross-strait trade and investment.
Yesterday's gains would have been even more impressive if it hadn't been for profit-taking in the last half-hour of trading, dealers said.
The TAIEX rose 25.4 points, or 0.35 percent, to close at 7,370.44 on the Taiwan Stock Exchange. Turnover was at the highest level in almost two years at NT$190.349 billion (US$6.015 billion).
For the week, the benchmark index rose 198.67 points, or 2.77 percent, in total, compared with a 1.11 percent increase last week, according to the stock exchange's tallies.
The growth momentum is expected to carry into next week as the market reflects a liquidity-driven performance, but technology shares may take over from financial stocks as the major drivers, an analyst said.
"Foreign investors are the major buyers of local shares. Financial stocks top their purchases because they are cheap," said Stevie Chou (周奇賢), a strategist at SinoPac Securities Corp (建華證券).
Overseas fund managers, which hold more than 30 percent of local stocks by value, yesterday bought a net NT$16.63 billion worth of local shares, bringing the total net purchase to NT$312.34 billion since early this year.
"We believe foreign investors still hold a bullish view on the local market," especially if cross-strait ties improve, Chou said.
Taishin Financial Holding Co (台新金控), Chang Hwa Commercial Bank (彰化銀行) and Chinatrust Financial Holding Co (中信金控) were the top three picks among foreign investors yesterday as concern over credit-card debts eased.
Shares of Taishin Financial were down 2 percent at NT$22.40 after the company said on Thursday that it plans to buy an additional 7.5 percent stake in Chang Hwa. Chang Hwa shares were up 1 percent to NT$22.45.
Tech shares with rosy prospects, such as those of manufacturers of memory chips and liquid-crystal-display (LCD) panels, are likely to take over from financial and asset-related stocks next week to drive the local stock market, Chou said.
The TAIEX is expected to fluctuate between 7,100 and 7,500 points next week, he forecast.
In a report released on Thursday, Credit Suisse raised its year-end target for the TAIEX to 8,000 points, citing reduced political risks as a key factor to help lower equity costs.
"If cross-strait policies continue to improve, even slowly, the benefits should be greater for asset-related firms," the report read.
In the report, Credit Suisse downgraded the nation's technology sector to "underweight" from "market weight" because of high valuation, peaking data momentum and only mild gains on high expectations of positive growth.