Taiwan’s benchmark stock index stands a chance of hitting the 10,000-point mark this year, given Taiwan’s improved economic fundamentals and an anticipated capital infusion from China, market analysts said on Friday.
They made the optimistic forecast after the Taiwan Stock Exchange (TWSE, 台灣證交所) bade farewell to a rough year in an upbeat mood on Thursday, with its weighted index closing at its high for the year at 8,188.11.
Although Taiwan’s economy suffered a severe slump last year as a result of the global financial downturn, the local bourse has rallied substantially since hitting the year’s lowest level of 4,242.61 points on Jan. 20
For the year, the index advanced 3,596.89 points or 78.34 percent, the largest one-year rally in 16 years, TWSE statistics showed.
Market analysts said the bullish trend is expected to continue in the first month of this year in terms of capital inflow and general economic performance.
They said that quite a few Taiwanese companies found new niche markets following the global financial meltdown and posted record earnings last year.
“Their remarkable gains are one of the major factors attracting the capital inflow that has helped fuel the recent stock market rally,” said Chang Tao-lang (張島郎), a senior executive at Jih Sun Securities Investment Trust Co (日盛投信).
Last month alone, Chang said, foreign institutional investors bought a net NT$80 billion (US$2.5 billion) in shares in anticipation of a continued robust rally on the local stock exchange.
Moreover, Chang said, Chinese qualified domestic institutional investors (QDIIs) are expected to pump at least NT$30 billion into the local stock market after the cross-Taiwan Strait memorandum of understanding (MOU) on financial supervisory cooperation takes effect on Jan. 16.
“Investment from Chinese QDIIs will further contribute to market liquidity,” Chang said.
David Chu (儲祥生), chairman of Hua Nan Investment Trust Corp (華南永昌投信), also said the local bourse would remain strong in the first quarter of this year.
However, he said the market’s prospects for the second quarter would depend on whether domestic economic fundamentals can catch up with market expectations.
Statistics compiled by KGI Securities Investment Trust Co (凱基投信) showed the local stock index had risen an average of 4.24 percent in January over the past 25 years, with the index rising 13 times and falling 12.
In his New Year’s Day speech, President Ma Ying-jeou (馬英九) reaffirmed his administration’s commitment to working hard and promoting investment in Taiwan to revamp the local economy following its year-long recession.
Declaring that “now is the time to invest in Taiwan,” Ma said the government would invest about NT$328.5 billion in major infrastructure construction projects in the new year and private investment is expected to reach an estimated NT$1.72 trillion.
Ma’s remarks are expected to further bolster the stock market prospects for the coming months, the analysts said.
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