Buoyed by an across-the-board market rise in Asia amid Europe debt hopes, Taiwan’s stock market ended higher yesterday, with the rally driven by the technology sector, financial sector and traditional industry shares.
The TAIEX closed up 3.09 percent, or 212.83 points, at 7,089.95, after the market fell to a two-year low on Monday, ending 2.4 percent lower at 6,877.12, Taiwan Stock Exchange data showed.
Turnover expanded to NT$114.87 billion (US$3.77 billion), from NT$106.31 billion on Monday, with three institutional investors buying a net total of NT$2.75 billion of shares, after selling a net total of NT$3.79 billion on Monday, data showed.
However, Shih Sheng-fa (施勝發), a fund manager at Prudential Financial Securities Investment Trust Enterprise Co (保德信投信), said confidence remained weak on the local market amid the recent global bear run, despite yesterday’s rebound.
“The renewed interest of foreign equity buying, rebound in large-cap shares, Greece’s escape from a debt default and China’s upcoming holiday buying spree hold the key to the local market’s short-term outlook,” Shih said yesterday.
The TAIEX might also find strong support, if the large-cap Taiwan 50 Index, which accounts for nearly 50 percent of the main bourse’s turnover, could hold above its critical 10-year moving average at around 6,680 points, he said.
Hsiao Chi-wen (蕭棋文), a fund manager at Capital Investment Trust Co (群益投信), said the valuation of Taiwanese shares was lower than six months ago, since the TAIEX has fallen more than 20 percent since it set an intraday high of 9,221 on Feb. 8. The further downside risk is low, but market volatility would likely remain, he said.
Nonetheless, William Dong (董成康), head of research at UBS Securities Pty Ltd, Taipei Branch, said valuation alone was not sufficient to offer support for the market.
Moreover, the continued downtrend in the New Taiwan dollar is poised to be negative to the market, because the impact of more foreign liquidity withdrawn from the local equity market to avoid currency losses is larger than that of any help for exporters, Dong said in a market strategy report yesterday.
The NT dollar has fallen 4.95 percent against the US dollar since the beginning of this month, edging down 0.29 percent so far this year, central bank data shows.
“For market sentiment to improve, what we need to see is the bottoming in fundamentals,” with key indicators including foundry utilization, business climate index and outstanding margin loans, Dong wrote. “Then ... the market should begin to stabilize.”
UBS suggested that foundry utilization might continue trending lower into the fourth quarter, before bottoming out in the first quarter of next year.
As a result, the brokerage forecast the local market would remain volatile into next month, followed by a shallow rebound in November-to-December period, before seeing the nation's fundamentals to bottom out in the first quarter of next year.