The central bank’s latest interest rate hike is not likely to interrupt the local stock market’s recent upward momentum because the market’s ample liquidity remains strong enough to support share prices, strategists said yesterday.
Jih Sun Securities Investment Trust Co (日盛投信) chief investment officer Chang Tao-lang (張島郎) said the central bank’s rate hike could in the short-term create bearish sentiment in the stock market and cause volatile trading.
“But the rate hike also represents [the central bank’s] confidence in Taiwan’s economy ... Therefore, we could view the cycle of rate hikes as a positive boost to the stock market in the long-term,” Chang said in a statement.
Chang said that during the period of economic expansion, the central bank would continue raising rates in a bid to bring interest rates back to a “neutral” level.
“A hike of 0.25 percentage points is not impossible in the coming quarters,” he said.
Yu Jui-ming (余睿明), chief investment officer of Prudential Financial Securities Investment Trust Enterprise Co (保德信投信), said an increase of 0.125 percentage points in interest rates was only symbolic, adding that the bank would not raise rates drastically in the near future.
As yesterday’s rate increase met market expectations, Yu said the local bourse would continue its current consolidation at about the 8,200-point level until there is a clear sign of recovering consumer electronics purchases ahead of the year-end holiday season.
David Chu (儲祥生), chairman of Hua Nan Securities Co (華南永昌投顧), also believes the rate increase will not impact the main bourse, citing past experience that the TAIEX still rallied to more than 8,000 points after a short-term drop following the central bank’s last rate hike in June.
“Eighty percent of the performance of the local bourse still depends on Wall Street,” Chu said, adding that it is more important to watch electronics shares, especially as local electronics companies will publish their balance sheets this month.
Chu said the rate hike could adversely affect construction stocks as it was a monetary measure to rein in rising property prices in the Taipei area, while Yu said financial shares would benefit the most from the hike because of better income-through-interest prospects.
Additional reporting by Ted Yang
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