The opposition parties' plan to recall President Chen Shui-bian (陳水扁) is unlikely to impact on the local bourse, as the expectations for the foreseeable future, including further cross-strait liberalization, would continue to support market performance this week, analysts said yesterday.
"The current political dispute is not expected to affect the stock market, as things cannot get much worse than they already are," Michael Lan (藍文彥), a fund manager who oversees a NT$1.6-billion (US$50 million) portfolio at Allianz Global Investors Taiwan Ltd, said during a telephone interview yesterday.
On Saturday, thousands of protesters led by the People First Party took to the streets, calling for Chen's resignation amid the intensifying probes into snowballing corruption allegations against his son-in-law Chao Chien-ming (趙建銘).
The political turmoil will not dampen the positive sentiment from the perception that the new Cabinet is being far more proactive and moving much faster toward further opening up exchanges across the Taiwan Strait, Lan said.
Also, the valuation of Taiwan's market has become relatively cheaper with a price-earnings ratio 12 times to 13 times that of other markets after the previous correction, which is attractive to investors, he said.
There is still a possibility that the benchmark index will climb above 7,000 points again this week, the analyst added.
The government said last Friday that it would increase the daily limit of Chinese tourists allowed into Taiwan to 1,500 starting from October, up from the original limit of 1,000, after Premier Su Tseng-chang (蘇貞昌) vowed one day earlier to prioritize the relaxation of cross-strait relations, such as direct links.
Stimulated by the encouraging information, the TAIEX gained 1.27 percent to 6,959.64 last Friday, with tourism and transportation-related stocks soaring to almost the 7-percent daily trading limit.
Foreign investors bought a net of NT$4.94 billion on Friday alone, making up over half of their net purchases of NT$8.86 billion for the whole of last week.
"The government's move to respond to the market's expectations by the loosening of its China policy helps not only attract more foreign investment, but strengthens the confidence of local investors," JF Asset Management (Taiwan) Ltd said.
Both German and US investment firms suggested that investors cash in on tourism stocks and asset-rich companies that can benefit from likely cross-strait relaxation and possible inflationary risks.
Yet, the optimistic attitude did not seem a universal viewpoint, as Macquarie Securities appeared much more conservative than its peers.
"Politics in Taiwan as elsewhere is always a risky game. In our view, there will probably be better buying opportunities in the coming months rather than right now," Macquarie Securities said in a report released last Friday.
While the market has strong support at the 6,750 to 6,800 level, it is a breakdown from here that they are looking to buy into, it said.
The Australian brokerage is concerned about fickle domestic confidence that is easily affected by politics for the next three to six months, it said.
Other concerns include bearishness about high-tech plays, which could be subject to inventory, strong currency and bullish earnings forecasts, and the hot asset plays that are really concept stocks, Macquarie said.
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