The TAIEX may fluctuate within a tight range in the near term as global economic bellwethers show continued improvement, despite deepening concerns over the tapering of US quantitative easing (QE), stock analysts said.
The main trading index edged up 0.88 percent last week to close at 7,925 on Friday after moving between a tight range of 7,888 and 7,986, as listed firms unveiled their second-quarter earnings results, Taiwan Stock Exchange data showed.
All together, listed companies posted NT$285.7 billion (US$9.52 billion) in net income during the April-to-June period, down 18 percent from the preceding quarter, but up 30.5 percent from the year-ago level, in line with market expectations, Allianz Global Investors Taiwan (德盛安聯投信) fund manager Sunny Chung (鍾兆陽) said in a note.
The German fund house expects the TAIEX to consolidate with a positive bias this week and for the rest of this quarter, as the US economy remains on track for recovery and the 17-member eurozone emerges from recession, Chung said, adding that Japan’s economic reforms are making progress.
However, global funds will move cautiously as the QE tapering looms closer, the analyst said.
The US Federal Open Market Committee, which makes decisions about interest rates and the growth of money supply, may give further tips over the QE exit next month after signaling plans in June to wind down bond purchases, Chung said.
The Fed may feel more comfortable moving in the direction after the initial jobless claims dropped to a new low in six years to 320,000 last week, the analyst said.
“The QE tapering may weigh on market liquidity in the short run, but should be deemed a positive twist in the long term,” Chung said.
Foreign institutional investors slashed another net NT$5.76 billion in local shares last week, while proprietary traders cut NT$3.59 billion, but mutual funds increased their net position by NT$1.15 billion, according to stock exchange statistics.
Taishin Securities Investment Trust Co (台新投信) said the local bourse may remain sluggish unless global funds flow back to emerging markets, including Taiwan.
Hot money has since June migrated from emerging to advanced economies, Taishin fund manager Shen Chien-hung (沈建宏) said.
Liquidity aside, the much-anticipated launches of new Apple devices, including the low cost iPhone, iPad5, iPad 5S and Macbook series next quarter may lift shares of Taiwan companies in the supply chain, Shen said.
“The TAIEX appears to have found support at current levels and may stay there ahead of back-to-school and Christmas sales seasons,” Shen said in a note.
Both Chung and Shen are positive about technology names involved in the supply of flat panels, smartphones and chipmakers.