Analysts are predicting a brief rally in stock prices tomorrow after President Ma Ying-jeou (馬英九) won his second term in office by a bigger-than-expected margin yesterday, as his policy of boosting trade ties with China during his first tenure found voter support.
The election result would lead to a price rebound in stocks in the tourism industry, airline companies and Taiwanese firms that have greater exposure to China’s market, said Henry Chen (陳志恆), an analyst with Value Partners Concord Asset Management Co (惠理康和投信).
The government’s pledge of continuing to use the state-owned National Stabilization Fund to prop up the market would also help, Chen said.
On the eve of election day, the fund’s management committee announced plans to extend its market intervention for another three months in an effort to lift investor confidence.
In addition, Chen said companies whose executives had publicly voiced their support for Ma before the elections would stand a better chance of seeing a near-term upswing in their share prices.
Prior to the elections, several corporate executives expressed concern that a win by Democratic Progressive Party Chairperson Tsai Ing-wen (蔡英文) would put Taiwan-China relations at risk, both politically and economically.
Hon Hai Group (鴻海集團) chairman Terry Gou (郭台銘) was the first among a series of Taiwanese executives to voice their support for the Chinese Nationalist Party (KMT) and Ma. Hon Hai Precision Industry Co (鴻海精密), the group’s flagship company, makes iPhones and iPads for Apple Inc.
On Friday, Cher Wang (王雪紅), chairwoman of Taiwanese smartphone maker HTC Corp (宏達電), also stood up for Ma’s cross-strait policy and offered her firm support for the so-called “1992 consensus.”
“A cross-strait relationship without the ‘1992 consensus’ is beyond my imagination,” Wang said at a press conference.
The TAIEX closed slightly lower on moderate turnover on Friday, down 0.07 percent to 7,181.54 points, as investors awaited the outcome of yesterday’s elections. Before the elections, analysts said that if the China-friendly Ma won re-election, the TAIEX might rise and financial, tourism and airline stocks would likely lead the market’s advance.
Masterlink Securities Investment Advisory Corp (元富投顧) president Liu Kun-hsi (劉坤錫) yesterday said banking stocks were expected to see an upswing as they would be able to smoothly tap into the Chinese market, as planned.
However, he warned that the stock market advance might just be a “one-day rally in celebration of Ma’s re-election ahead of the nine-day Lunar New Year holiday.”
“The spreading European debt crisis and the slow pace of the US economic recovery will outweigh the domestic political element in driving the movement of the TAIEX,” he said.
The global uncertainty deepened yesterday after US ratings agency Standard & Poor’s stripped France of its top “AAA” rating and downgraded the ratings of eight other eurozone countries. This would offset the upturn of local share prices, Liu said.
“In the first two quarters of this year, the global economic slump would continue to cap the domestic stock market’s rise,” Liu said.
Chen said the TAIEX’s advance would be limited by technology stocks as Taiwan’s electronics sector, which account for about 60 percent of the local bourse’s average turnover, was vulnerable to Europe’s debt problems.