Market confidence rising: analysts

The recent political disputes would not upset foreign investors, while the anticipation for further liberalization of cross-strait relations has built up investment confidence in the local market, analysts said yesterday.

"We are optimistic about the market for the whole year ... and want to put more money into Taiwan," said Peter Sutton, head of research at CLSA Ltd (Taipei), on the sidelines of a lunch yesterday.

The lunch themed "Preparing for full cross-strait business normalization" was organized by the European Chamber of Commerce Taipei. Sutton was ajudged the best Taiwan market strategist for this year by Institutional Investors last month.

He said the market is expected to experience another peak in the second half of this year, with the TAIEX hitting as high as 7,500 points.

Sutton did not think the rising political tensions caused by the opposition's plan to recall President Chen Shui-bian (陳水扁) would be a major threat to the local bourse. Local markets have largely factored in the political confrontation that Taiwan has seen in recent years.

The recent correction of the local bourse was part of a worldwide phenomenon, in part driven by fears of further interest rates hikes to contain inflationary pressures, according to Sutton. He cited similar corrections in the Japanese, Korean and US stock markets during the same period.

The TAIEX was up 149.38 points, or 2.32 percent, to 6,575.77 at closing time yesterday, with foreign investors buying a net of NT$10.33 billion (US$317 million).

An increasing social consensus on improving cross-strait relations would encourage the government to relax restrictions, and political disputes were unlikely to affect the trend, Sutton said.

Following the relaxation of restrictions on charter flights, he expected the government to announce more liberalization measures after a national economic development conference scheduled for next month.

Among the proposed topics for the conference is a plan to remove the cap on China-bound investment. Currently, China investment cannot exceed 40 percent of a Taiwanese companies' net value.

Meanwhile, it is also likely that there will be an adjustment in cross-strait policy in the near future as differences in the Cabinet's internal viewpoints is narrowing, the Central News Agency quoted Vice Premier Tsai Ing-wen (蔡英文) as saying yesterday.

Speaking before the Chinese National Association of Industry and Commerce (工商協進會) yesterday morning, Tsai said the government would further expand the normalization of passenger and cargo charter flights following the opening-up earlier this week, the report added.

BNP Paribas Securities (Tai-wan) said yesterday it remained bullish on the Taiex as the recent opening of charter flights is expected to accelerate liberalization.

The French brokerage said that, despite the recall bid, China seemed willing to ink an agreement with the Chen administration in light of the opening of charter flights, and that the opposition parties were likely to continue to push for the approval of a direct links bill currently under review in the legislature.

Moreover, BNP Paribas said it would be in Premier Su Tseng-chang's (蘇貞昌) political interest to expedite liberalization with China, as the move would steal the initiative from the pan-blue camp's proposed recall motion.