The local bourse shed 5.46 percent more last week than the previous week amid concerns over the debt crisis in Europe, but the market has a 67 percent chance of bouncing back this week, Taishin Securities Investment Trust Co (台新投信) said.
“Based on past experience, when Taiwanese stocks rebounded from the low levels of the 2008 global financial crisis, the market has a 67 percent chance of rising [this] week after shares fell more than 5 percent [last] week,” Kent Liu (劉宇衡), who manages the Taishin High Dividend Yield Balanced Fund, said in a research note on Friday.
Stock markets in Taiwan, Hong Kong and China were the worst performers in Asia last week, which analysts said was because of the escalating debt crisis in Greece and China’s credit tightening policy.
PHOTO: SAM YEH, AFP
For the week, the TAIEX fell 437.15 points to 7,567.10 on Friday. At one point during the day, the benchmark index fell below its 240-day moving average (7,436.68) support level following Wall Street and regional market weakness, but it was able to stay above its 12-month moving average (7,498), according to the Taiwan Stock Exchange data.
During the past 18 months, the local bourse has had six weekly declines of more than 5 percent since it started rebounding from a low of 3,955 points on Nov. 21, 2008, Liu said.
“Of these six, there were four times when the market rose the following week, or a 67 percent chance, with a weekly increase of 2.16 percent on average,” he said.
Liu said the local bourse was still dominated by bullish investors and suggested investors hunt for bargains for mid-term to long-term investment. He maintained a positive view on the technology sector and was selective in the materials and airlines sector in his portfolio.
However, Yu Jui-ming (余睿明), chief investment officer of Prudential Financial Securities Investment Trust Enterprise Co (保德信投信), said the local bourse’s performance this week would depend on the US stock market.
Yu said foreign investors have recently turned conservative and gradually pulled their money out of the local market amid uncertainty over the Greek debt problem.
“The crisis of confidence poses a larger impact on market liquidity. If liquidity starts to shrink in the financial markets, it would negatively affect recovering consumption and investment,” Yu said in a note on Friday.
While Taiwan’s economic fundamentals remain good, the market is expected to see further corrections this quarter, Yu said.
For this week, investors should focus their attention on the value of the euro and the outcome of sales of new bonds by European nations, as well as China’s consumer prices report which is scheduled yo be released tomorrow, he added.
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