Positive trading expected following Chen's speech

Investors can expect a positive day of trading on the local bourse today after concerns President Chen Shui-bian (陳水扁) would touch on sensitive issues in his inauguration anniversary speech yesterday, an analyst said.

"No news is good news for the stock market," Jason Huang (黃崇恩), an assistant manager at UOB Investment Advisor (Taiwan) Ltd, said in a telephone interview yesterday.

The nation's stock market was sluggish last week with daily turnover shrinking to as low as NT$66.4 billion (US$2 billion) as investors grew cautious ahead of Chen's speech, which has negatively impacted on the market in recent years.

Chen, however, did not touch on issues related to cross-strait relations yesterday.

Taiwan's equity market, a laggard in the region, is expected to strengthen this week and catch up with neighboring markets that may remain robust despite the Chinese government's latest round of tightening measures announced last week, Huang said.

UOB Investment expects the TAIEX to fluctuate between 7,900 points and 8,100 points this week.

The Chinese government announced last Friday it would raise interest rates in a bid to rein in its runaway economic growth and investment activities.

The country, however, also relaxed the trading band of its currency against the US dollar before a bilateral high-level meeting in Washington this week, in which the currency rate is expected to top the agenda.

The relaxation is expected to attract more fund inflows into the region to bolster Asian stock markets that could to some extent stimulate the TAIEX, Huang said.

The recently weak NT dollar could strengthen in the near future along with other Asian currencies boosted by the rising yuan after the relaxation, which could pump international funds into the region, the analyst said.

This may help curb capital outflow fueled by depreciating local currency and in turn benefit the local equity market with better capital momentum, he said.

Foreign and local institutional investors combined sold a net NT$14.78 billion worth of shares last week, according to Taiwan Stock Exchange data, amid the cautious investment atmosphere and weak NT dollar.

Meanwhile, Macquarie Equity Research said it is time to readjust the underweight position of Taiwan's market.

"We expect growth to accelerate in the second half of this year, driven by stronger export growth as a cyclical turnaround in the technology sector materializes," the Australian brokerage said in a research note released last week.