The US Federal Reserve’s third round of quantitative easing (QE3) will affect Taiwan’s stock market for one to two months, UBS Securities Taiwan said on Saturday.
The quantitative easing policy will likely benefit the stocks of companies in the construction sector and those with high tangible assets more than any others, said William Dong (董成康), head of research at UBS Securities Taiwan.
The Fed announced on Thursday it would be spending US$40 billion to buy mortgage-backed securities every month for however long it deems necessary, a move Dong said would promote the flow of capital in the short term, which will indeed help Taiwanese stocks.
However, in the middle and long term the impact of QE3 will be decided by the strength of economic recovery, said Dong, who did not anticipate big changes in Taiwan’s economy over the next six months.
The TAIEX closed up 2.1 percent at 7,738.05 on Friday last week, its highest close since April. The index is expected to challenge the 8,000-point mark in the near term, but other academics and economists were cautious about the impact of QE3 on Taiwan.
Polaris Research Institute (寶華綜合經濟研究院) president Liang Kuo-yuan (梁國源) said he worried capital would flow to high-risk assets, including crude oil and commodities, while Liu Meng-chun (劉孟俊), director of the center for economic forecasting at the Chung-Hua Institution for Economic Research (中華經濟研究院), warned that Taiwan could soon face imported inflation.
Dong said he expected QE3 would lead to the appreciation of the New Taiwan dollar, but by a lesser degree than during the previous two rounds of quantitative easing.
From November 2008 to March 2010, the NT dollar gained 4.8 percent during QE1 and about 6 percent during QE2 from November 2010 to June last year. The NT dollar rose NT$0.23 to close at NT$29.469 against the US dollar on Friday, its highest level since May 11.