The TAIEX is likely to consolidate this week with a positive bias on the back of technical rebounds and investors feeling more comfortable with the trading band increase, analysts said yesterday.
However, financial volatility in Europe and the US could merit caution, as Greece’s debt payments and potential US Federal Reserve interest rate hikes continue to weigh on sentiment, analysts said.
The main trading index shed 3.72 percent, or 360.94 points, in five straight sessions last week after authorities relaxed the trading band from 7 percent to 10 percent, in line with global practices.
“The lack of major directions will keep the TAIEX consolidating this week, with possible technical rebounds on the back of bargain hunting,” state-run Hua Nan Securities Co (華南永昌投顧) chairman David Chu (儲祥生) said by telephone.
The eased fluctuation limit raised risk awareness, especially among retail investors, who account for a big majority of the local bourse, Chu said.
Institutional and individual investors are likely to grow more comfortable with the change and increase holdings in local shares, in particular shares that are undervalued and pay good dividend yields, Chu said.
The TAIEX could trade in a range from 9,300 to 9,500, with a daily turnover of NT$100 billion (US$3.22 billion) against such a backdrop, the analyst forecast.
Allianz Global Investors Taiwan (德盛安聯證券投信) attributed recent TAIEX corrections to a conservative investment strategy across global bourses after the IMF revised downward its US GDP growth forecast and Greece indicated plans to delay debt payments due on Friday last week until the end of the month.
Foreign institutional players trimmed positions by a net NT$36.98 billion in the last six sessions, while mutual funds cut a net 3.46 billion and proprietary dealers slashed another net NT$4.88 billion, Taiwan Stock Exchange data showed.
“Though foreign players took the selling side, most funds stay in Taiwan, suggesting they remain interested in local shares and may up stakes once global bourses stabilize,” Allianz fund manager Corrina Xiao (蕭惠中) said.
The Dow Jones dropped 57 points on Friday in New York trade as jitters over interest rate hikes deepened following a report of better US job growth figures.
Most European shares ended down before the weekend, dragged partly by bond price falls in Germany, France, Italy, Spain and Portugal.
However, the global economy remains on course for a modest recovery and excess liquidity will continue to lend support to equity investments, Xiao said.
The widened trading band would be deemed a neutral factor going forward, as investors refocus on fundamental issues — corporate earnings results and industry outlook, both analysts said.
Most technology firms may not put up impressive records during the low season this quarter, but the trend could change with the advent of the high season in the second half of the year, the analysts added.
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