Shares rally 2.25% ahead of vote

People watch monitors displaying Taipei Stock Exchange prices in Taipei yesterday. The market rose 187.37 points, closing at 8,524.99. PHOTO: CHANG CHIA-MING, TAIPEI TIMES

Shares climbed 2.25 percent yesterday, the last trading session before the presidential election, driven primarily by expectations that cross-strait relations will improve after the election, analysts said.

A strong rebound on Wall Street overnight also contributed to the climb, they said.

The benchmark TAIEX rose 187.37 points to 8,524.99. Turnover was NT$171.362 billion (US$5.6 billion) yesterday, up from NT$145.699 billion the previous day, Taiwan Stock Exchange tallies showed.

"Investors were betting on a win by the pan-blue camp in the election and the ruling party has also helped lift stocks, as it did not want to look bad before the election," Dave Chou (周顯黎), an assistant manager at Yuanta Securities Investment Consulting Co (元大投顧), said in a telephone interview yesterday.

Foreign fund managers led the three major institutional investors with net purchases of NT$25.25 billion in local stocks yesterday -- the highest one-day net purchase so far this year -- after they sold a net NT$45.46 billion in the week to Thursday.

"Market turnover is expected to return to the normal level next week."

Alan Tseng, vice president of Capital Securities

Domestic investors -- including investment trust firms and proprietary traders -- also bought a net NT$6.5 billion in local stocks. For this week, they have spent a net NT$12.04 billion on local equities, the stock exchange' data showed.

"Banking and electronics led the election-eve share rally," Chou said, adding that the banking shares saw a transaction surge over the previous day partly because investors expected local banks would expand their businesses to China regardless of the election outcome.

Banking shares rose 2.63 percent on average yesterday. Trading of bank stocks increased in volume, accounting for 24 percent of the main bourse's total trading yesterday, compared with 21 percent on Thursday, the stock exchange's data showed.

Electronics shares climbed 2.49 percent on average, but the sector's trading accounted for 43.3 percent of total market turnover yesterday, which was a setback compared with its recent level of 50 percent, Chou said.

"It showed investors were not very convinced about this sector's future performance," he said. "People still have to consider the sector's fundamentals and risks, such as first-quarter earnings and forex losses as the market opens next week."

Taiwan stocks yesterday outperformed those of major regional markets. Japanese share prices closed up 1.81 percent, South Korean stocks ended 1.4 percent higher and the Shanghai bourse was down 0.20 percent.

But Alan Tseng (曾炎裕), a vice president of Capital Securities Corp (群益證券), said yesterday's share rally reflected a short-term election effect.

Tseng declined to predict the impact of election results on share segments during the post-election period. He did say, however, that he was cautious about the surge of foreign investors' net purchases, saying it was not always an indication that the market would stay strong over the following sessions.

The stock exchange's tallies showed that foreign fund managers bought a net NT$21.32 billion in local shares on Feb. 27, but it was immediately followed by a net sale of NT$18.88 billion by foreign fund managers on Feb. 29 and March 3.

When foreign investors came back to buy a net NT$18.49 billion on March 6, they quickly sold off a net NT$33.55 billion between March 7 and March 11.

When foreign investors made net purchases of NT$13.09 billion on March 12, they then dumped a net NT$75.75 billion between March 13 and March 18, the stock exchange's data showed.

Tseng urged investors to be realistic about the listed companies' fundamental development instead of making decisions based on the actions of foreign investors or the election.

"Market turnover is expected to return to the normal level next week and profit-taking pressure is likely to take place during the post-election sessions," Tseng said by phone.