The stock market will likely encounter technical corrections in the near future after a strong showing over the past week thanks to aggressive foreign institutional buying, Taishin Securities Investment Trust Co (台新投信) fund manager Wei Yung-hsiang (魏永祥) said.
Selling might soon prevail because of worries over a stronger New Taiwan dollar, which could hurt exporters’ profits, especially in the high-tech sector, he said.
The TAIEX ended last week up by 382.32 points, or 4.29 percent, at 9,284.62, its highest level since May 3, when it ended at 9,294.12.
Taiwan Semiconductor Manufacturing Co (台積電) led the gains, rising more than 8 percent to NT$187.50 on Friday. Its market capitalization was up NT$360 billion (US$11.5 billion) last week.
Foreign institutional investors bought a net NT$25.93 billion in shares during the week as a growing number of them moved funds into the region, betting on a weaker US dollar.
The significant upturn in stocks might lead investors to lock in profits in the near future as the market is seen to have overshot a little bit, Wei said.
As the US Federal Reserve is not expected to raise rates until at least December, foreign funds could continue to flow into the region and lift the NT dollar, which could hurt the competitive edge of the nation’s high-tech exporters and prompt investors to sell some of their holdings down the road, Wei said.
Wei said the US presidential election could also affect global financial markets, including Taipei.
If Democrat Hillary Rodham Clinton wins, it would not be seen by the market as a negative lead, but if Republican Donald Trump wins, the specter of US protectionism could have an adverse impact on world markets, he said.
The silver lining is that Taiwan’s economy should improve next year, helping listed companies improve their bottom lines, he said.
That in turn would lend support to the local equity market and help fend off selling from technical corrections, he said.
When the TAIEX falls to a 220-day moving average of about 8,500 to 8,600 points due to short-term corrections, it could be a good time to buy, Wei said.
The Directorate-General of Budget, Accounting and Statistics recently raised its forecast for the nation’s economic growth to 1.22 percent for this year and said that growth could hit 1.88 percent next year.
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