The TAIEX pulled back last week slightly from the previous week amid profit-taking. Equity strategists said local shares would likely face a narrow-trading week before the Lunar New Year holiday.
The stock market will close on Jan. 31 and trading will not resume until Feb. 8.
Tang Chih-chung (譚志忠), a fund manager at Prudential Financial Securities Investment Trust Enterprise Co (保德信投信), said he expected the market to continue its range-bound consolidation during the last trading week before the holiday.
“What we should pay attention to is how foreign investors behave after a net purchase of nearly NT$70 billion [US$2.38 billion] in local shares over the last three weeks,” Tang said in a research note on Friday. “The market would also weigh the results of major corporate earnings to be released next [this] week.”
The TAIEX dropped 0.2 percent last week and closed at 8,954.38 in Friday trading, with an average daily turnover of about NT$130.43 billion last week, 4.25 percent higher than the NT$125.11 billion the previous week, data from the Taiwan Stock Exchange showed.
The index has increased 9.63 percent in the last three months and risen 16.8 percent over the past six months, prompting speculation about a pullback before the holiday.
“Various technical charts show Taiwan’s stock market is still in a bull run,” Wang Ya-feng (王雅楓), a fund manager at Industrial Bank of Taiwan (台灣工銀), said in a -note on Friday.
Wang said the market’s ample liquidity, driven by the appreciating New Taiwan dollar, remained strong enough to support share prices as long as foreign investors stayed on the buy side.
Even so, the increased volume of margin loans over the past few months has shown local investors to be more aggressive in building investment portfolios, but at the same time raised questions as to whether this risk is under control.
Wang shrugged off such concerns.
“The TAIEX has risen about 28.6 percent from last year’s low to this year’s peak, while the outstanding margin loans has expanded roughly 30.4 percent from NT$248.3 billion to NT$323.8 billion over the same period, which indicates the increase in margin loans is still in the safety zone,” she said.
The TAIEX reached 9,086.02 points last Tuesday, the highest level since May 2008. However, the rise above the 9,000-level was not sustained in the following sessions after camera lens maker Largan Precision Co (大立光) on Wednesday reported NT$310 million in foreign exchange losses in the fourth quarter last year, increasing market concerns over foreign exchange losses at electronics companies, another strategist said.
“Other electronics firms do not enjoy margins as high as Largan does, but they all operate in the same macroeconomic environment and therefore their foreign exchange losses could be even larger,” Henry Chen (陳志恆), an investment research director at KBC Concord Asset Management Co (康和比聯投信), said in an e-mailed statement.
The NT dollar strengthened 3.07 percent against the US -dollar in the fourth quarter of last year. Since the beginning of this year, the currency has risen 3.12 percent to close at NT$29.42 against the greenback on Friday, according to data from the central bank.
“The worries about foreign exchange losses may continue to put pressure on the electronics sector. It would be better for investors to wait for more earnings reports from electronics firms before making any decisions about entering the market,” Chen said.
Following Largan’s and smartphone maker HTC Corp’s (宏達電) earnings reports released last week, several high-tech companies in the fields of computer memory chipmaking, contract chipmaking, flat-panel making and chip packaging are scheduled to hold quarterly investors conferences this week to release their fourth-quarter financial results and provide sales guidance on the first quarter.
In the computer memory sector, Nanya Technology Corp (南亞科技) and Inotera Memories Inc(華亞科技) will hold their conferences today, followed by Macronix International Co (旺宏電子) tomorrow and Winbond Electronics Corp (華邦電子) on Friday.
United Microelectronics Corp (聯電), the world’s second--largest contract chipmaker, will face investors on Wednesday, while stronger rival Taiwan Semiconductor Manufacturing Co (台積電) will take the stage on Thursday.
Other heavyweight electronics companies set to release their quarterly results are Siliconware Precision Industries Co Ltd (矽品精密), the world’s No. 2 chip packager, on Wednesday ahead of industry leader Advanced Semiconductor Engineering Inc (日月光半導體) on Friday, while LCD panel maker AU Optronics Corp (友達光電) is scheduled to shed light on the latest developments in the display sector on Thursday.
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