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Politics casts shadow on bourse

The stock market is expected to open in bullish mood today, in the wake of a peaceful conclusion to the weekend's confrontation between the supporters of President Chen Shui-bian (陳水扁) and protesters seeking to oust Chen, a market watcher said yesterday.

However, the future development of the pan-blue camp's proposal to cast a no-confidence vote against the Cabinet could overturn the bullishness, he said.

"The market fluctuated last week reflecting investors' worries about possible outbreaks of violence over the weekend," Alex Huang (黃國偉), assistant vice president at Mega Securities Corp (兆豐證券), said in a telephone interview yesterday.

Since the weekend ended peacefully without major conflicts, the local bourse is expected to open strongly today, Huang said.

He expected the benchmark index to reach as high as 6,750 points today.

Tens of thousands of people took to the streets on Saturday to show their support for Chen and to rival a mass of protesters who had demonstrated for a week for Chen's resignation over corruption allegations.

Because of political unrest, the benchmark TAIEX experienced a roller coaster-like week and closed at 6681.09 last Friday, which represented a slide of 0.19 percent in the index last week.

Huang anticipated that the TAIEX could continue to consolidate beyond 6,500 points by the end of this month, before the future regarding the nation's political deadlock and US monetary policy becomes clearer.

The US Federal Reserve is slated to meet on Wednesday to discuss its interest rates policy and the market expects the authority to cease rate hikes eyeing easing inflation amid falling crude oil prices.

It is better for retail investors to stay cautious before the consolidation ends, Huang said.

Looking ahead, Mega Securities expected that the benchmark index could strengthen to a level of 7,000 points by the year's end, bolstered by healthy industry fundamentals and foreign investors' buying sprees.

Foreign investors have bought a net NT$48.14 billion (US$1.46 billion) since the beginning of this month, despite the political uncertainty, according to data from the Taiwan Stock Exchange.

Nevertheless, the optimism could be wiped out as reports said yesterday that the pan-blue camp is mulling casting a no-confidence vote against the Cabinet in the upcoming legislative session scheduled to commence tomorrow.

Any intensification of the political struggle could diffuse the optimism and bring the TAIEX down to as low as 6,000 points, Huang warned.

On investment targets, Mega Securities recommended high-tech companies for the high season effect and their attraction to foreign investors.

Top picks include leading panel makers like AU Optronics Corp (友達光電) and its lamp manufacturing affiliate Wellypower Optronics Corp (威力盟), as well as handset components providers such as Green Point Enterprises Co (綠點科技).

Meanwhile, investors can consider cashing in on oversold financial stocks backed by the banks' rebounding profits after the consumer credit abuse storm gradually eases off, according to Macquarie Securities and Lehman Brothers.

Recommendations include overly undervalued consumer business-focused firms like Chinatrust Financial Holding Co (中信金控) and Taishin Financial Holding Co (台新金控) as well as defensive insurance-centric stocks such as Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控), foreign brokerages said.
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