The local bourse has bottomed out and is gearing up for a rebound, an analyst said yesterday, as domestic shares rallied in line with global market gains in response to news that the US might end its interest rate hikes soon.
The TAIEX surged 166.50 points, or 2.65 percent, to 6,443.74 on turnover of NT$78.045 billion (US$2.37 billion) yesterday, marking the largest jump in nearly one month. Gainers outnumbered losers 905 to 109.
Foreign investors bought a net of NT$8.7 billion (US$235 million) shares yesterday, compared with net sales of NT$17.16 billion in the first three trading days of this week, according to the Taiwan Stock Exchange's data.
"We think the market has bottomed out and will fluctuate upward in the current quarter," Kevin Li (李文宗), vice president of the investment department at Shinkong Investment Trust Co (新光投信), told a media briefing yesterday.
Li predicted that the TAIEX would rise to around 6,800 points by the end of the third quarter and hit 7,500 points in the final quarter of the year.
The likelihood that the US may end its monetary tightening is expected to stimulate a robust inflow of foreign funds into Asian markets, which would in turn boost the local market, the analyst said.
US Federal Reserve Chairman Ben Bernanke's comment on Wednesday on interest rates boosted Asian markets. Japan's Nikkei 225 Stock Average gained 2.6 percent, South Korea's Kospi index rose 2.9 percent and Hong Kong's Hang Seng Index climbed 1.9 percent.
The pickup in confidence, coupled with the forecast recovery in demand for flat-panel TV, high-end handsets and notebooks, along with the upcoming rollout of Microsoft's new Vista operating system all contribute to a promising outlook for the nation's stock market, Li said.
However, US securities brokerage Merrill Lynch did not share Li's optimism. In a report released yesterday Merrill Lynch ranked Taiwan, along with other export-oriented countries like South Korea and China, as vulnerable markets that face the possibility of further earnings downgrade due to a strengthening local currency and the US' slowing growth.
The US brokerage retained its underweight rating for the Taiwanese market, as it forecast little near-term relief to the two problems that have continued to haunt the local bourse -- technology stocks and politics.
The technology cycle will continue to decelerate over the next few months, US inventories are edging up and guidance from companies for the second half is unreliable given that the majority of them have only a couple of weeks' order visibility, Merrill Lynch said.
The insider-trading scandal involving President Chen Shui-bian's (