The TAIEX may head for moderate corrections this week, taking cues from a US stock slide over the weekend, as the earnings results of major US firms pan out, analysts said.
The local bourse gained 1.3 percent last week to 8,888.54 points on Thursday ahead of the Tomb Sweeping holiday.
However, on Friday in the US, the technology-heavy NASDAQ Composite Index slid its most in two months.
Investors, particularly foreign institutional players, may turn cautious today after increasing holdings for nine trading sessions in a row, Taishin Securities Investment Advisory Co (台新證券投顧) president Chuang Ming-shu (莊明書) said in a note.
The Dow Jones Industrial Average pared 0.51 percent on Friday in the wake of a tepid job report.
For the first three months, foreign investors — institutional and individual — have wired net US$4.77 billion (NT$145.21 billion) to Taiwan, while adding local shares worth NT$90.01 billion net, the Financial Supervisory Commission said on its Web site.
“[Foreign investors] may want to adjust their strategies and take a break, given that state-run brokerages keep trimming positions,” Chuang said.
The TAIEX may soon emerge from the correction unharmed, if Wall Street’s retreat proves to be a short-term technical movement, the analyst said.
Allianz Global Investors Taiwan (德盛安聯投信) fund manager Corrina Xiao (蕭惠中) said the earnings results of major US firms are expected to affect local shares after the holiday, as Taiwan is home to the world’s largest contract chipmakers, chip designers, notebook vendors and critical component suppliers.
The figures will reflect the negative impact of earlier harsh weather on sales of different products, even though the US economy has since showed signs of sustained recovery, Xiao said. As a result, Taiwanese electronics firms may hit bumps going forward, as some have rallied more than 50 percent since the final quarter of last year and investors may want to cash out, the analyst said.
Sunny Chung (鍾兆陽), another fund manager at Allianz Taiwan, said electronics shares, which dominated the limelight last quarter, may share the stage with non-technology names this quarter, which is the slow season for the sector.
Firms without bright business prospects in sight may seem too expensive and encounter price slips, he said.
Downside risks associated with political unrest in Eastern Europe will continue to weigh, while China’s economic slowdown lingers, Chung said.
However, some shares may benefit from short-covering operations, as many listed companies are due to hold their annual shareholders meetings in June, meaning they need to meet the requirement by the end of this month, Jih Sun Securities Investment Consulting Co (日盛投顧) said.
That suggests NT$20 billion worth of share purchases, favorable for the TAIEX as this quarter unfolds, the brokerage said.