The stock market rallied to a six-month high while the New Taiwan dollar strengthened against the greenback yesterday after export data showed the nation’s economic situation is less dismal than expected, analysts said.
The benchmark TAIEX shot up 224.24 points, or 4.12 percent, to close at 5,667.8, the highest since Oct. 6, as investors regained confidence in the local bourse after a series of rate cuts rendered bank savings unattractive.
Turnover was NT$144.8 billion, (US$4.3 billion) with foreign fund managers buying a net NT$11.04 billion in local shares, Taiwan Stock Exchange statistics showed.
“Investors at home and abroad have returned to the stock market after the TAIEX rose above the 5,000-point mark last month,” Winson Wang (王榮旭), an analyst at Marbo Securities Consultant Co (萬寶證券投顧), said by telephone. “Equities trading promises better yields than bank savings these days.”
The weighted index has jumped 23 percent this year, the second-strongest performer in the region after its counterpart in China, Wang said, attributing the rallies partly to a slowing decline in exports.
Exports, which account for 70 percent of GDP, contracted 35.7 percent last month, compared with a 37.2 percent drop in January and February combined and a 41.9 percent plunge in December, the Ministry of Finance said on Tuesday.
“The contraction [in exports], while significant, is decelerating,” Wang said. “The recession appears to be stabilizing and may reverse sooner than expected.”
Johnny Chen (陳擎宏), deputy manager of the economics and industry research department at First Commercial Bank (第一銀行), said the central bank also helped push idle funds to the equities market after bringing the discount rate down from 3.625 percent in September to the present 1.25 percent.
“Time savings and deposits now pay interest of less than 1 percent,” Chen said by telephone. “It is therefore not surprising that many have channeled idle funds to stock investment instead.”
Chen, however, said it remained to be seen if the bullish sentiment could persist, as share prices are closely linked to economic fundamentals.
Still, the TAIEX rally helped reverse a two-day fall in the NT dollar, which gained NT$0.123, or 0.36 percent, to close at NT$33.77 against its US counterpart in Taipei yesterday.
Trade volume reached US$1.278 billion, Taipei Forex Inc data showed. Including turnover of US$336 million, total transactions amounted to US$1.614 billion, according to tallies from the two foreign exchanges.
A dealer at a local bank said domestic idle funds and inflows of hot money definitely helped bolster local share prices and the NT dollar.
“The trend will last for a while, though it may not serve as an indicator of recovery,” he said by telephone on condition of anonymity.