The improving outlook for the eurozone debt crisis and the maintaining of low interest rates in the US will maintain the TAIEX’s liquidity-driven momentum over the near term, driving up both the benchmark index and the New Taiwan dollar, analysts said.
The TAIEX was up 1.56 percent, or 187.28 points, from a week earlier, to close at 7,682.27 on Friday with the average daily turnover a high NT$145.8 billion (US$4.93 billion) for the week, Taiwan Stock Exchange data showed.
Kent Liu (劉宇衡), a fund manager at Taishin Securities Investment Trust Co (台新投信), said he expects the TAIEX to continue climbing to the 8,000 mark in the first quarter as recent reports showed that both the US and Chinese economies have grown steadily.
“This will help raise investors’ confidence about holding shares,” Liu said in a research note.
Liu added that strong buying of Taiwanese shares by foreign investors would be the other main factor driving up the TAIEX over the near term.
Foreign institutional investors have bought a net total of NT$88.6 billion in Taiwanese shares so far this year, exchange data showed.
Willie Shih (石隆智), a fund manager at HSBC Global Asset Management (匯豐中華投信), said the liquidity-driven market conditions are expected to continue if Morgan Stanley Capital International Inc raises its weighting of Taiwanese shares in a quarterly adjustment scheduled for Thursday.
Strong market liquidity is also reflected in the recent appreciation of the NT dollar against the US dollar.
Although the NT dollar dropped 0.12 percent from a week earlier to close at NT$29.56 versus the US dollar on Friday, it has appreciated by 2.41 percent against its US counterpart in the year to date.
“The NT dollar could keep rising in the first quarter as risks related to the eurozone debt crisis remain stable as expected,” Steven Yang (楊家彥), a director at the Taiwan Institute of Economic Research (台灣經濟研究院), said by telephone yesterday.
Since the US Federal Reserve said it would keep interest rates at record lows at least until 2014 and eurozone members might relax monetary policies by printing more money to deal with their debt problems, Yang said there might be substantial capital inflows to Asian emerging markets in the near future, pushing up the value of Asia’s main currencies.
However, the NT dollar is not expected to jump too much, as the central bank would carefully watch how the currency’s appreciation affected exports, Yang said, adding that the NT dollar would not strengthen past NT$29 against the US dollar for some time.
Liu Kun-hsi (劉坤錫), president of Masterlink Securities Investment Advisory Corp (元富投顧), said even if the liquidity-driven stock market conditions continue, it was possible for the TAIEX to oscillate between 7,800 and 8,000 in the short term.
Liu said he would steer investors toward financial stocks because of their relatively low valuations and also focus on selected shares in traditional industries that have not yet rebounded significantly from recent lows.