As the Taiwan Stock Exchange remains awash in liquidity, shares are expected to ride the wave of an uptrend after recent consolidation, market analysts said on Saturday.
Wang Chung-liang (王仲良), a manager of the Taishin Taiwan Small & Medium Cap Fund (台新台灣中小基金), is one of the upbeat analysts.
Wang said that several major central banks around the world have kept injecting funds into the market and that the spill-over effects have been seen in the local market, lending support to local shares.
The European Central Bank began a quantitative easing program early last month to buy bonds worth 60 billion euros (US$64.8 billion) per month from the market.
The Bank of Japan, which has launched its own stimulus package, is expected to announce an expansion of the program later this month, while the central banks of China and South Korea have cut their key interest rates to keep liquidity high.
A worse-than-expected US non-farm payroll report for last month might postpone an expected hike in interest rates by the US Federal Reserve which could further maintain global liquidity levels.
On Thursday, the TAIEX closed up 0.97 percent at 9,600.32 points on a technical rebound as foreign institutional investors shifted to the buy side and purchased a net NT$5.27 billion (US$168 million) worth of local shares on the main board.
The Taiwan Stock Exchange was closed on Friday for a public holiday.
Although foreign institutional investors registered a net sell-off in recent sessions to lock in their earlier gains ahead of Thursday’s buying, they still kept moving funds to Taiwan due to high liquidity levels in the global market, analysts said.
Wang said that investors have been advised to take advantage of the current ample liquidity by buying into stocks in certain sectors that have greater growth potential.
Among the sectors Wang favors are Internet-related stocks, which could benefit from China’s efforts to expand its 4G LTE network nationwide, while the analyst also recommended flat panel component suppliers that are expected to see rising demand due to strong sales in ultra-high-definition displays.
Wang said that integrated circuit design stocks could see demand growing in the China market, and memory chip makers are expected to see orders streaming in as their buyers rebuild inventories following the conclusion of the Lunar New Year holiday.
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