Local shares rose 0.6 percent last month and 6.04 percent in the first quarter due to continued purchasing by foreign institutional investors, but market watchers said there is some risk of a pullback because of concerns over the effect of foreign exchange losses on corporate earnings.
Foreign institutional investors made fund inflows totaling US$3.32 billion last month, a new monthly high since June last year, when the figure stood at US$4.05 billion, the Financial Supervisory Commission said last week.
Aggregate inflows in the first quarter totaled US$9.28 billion, according to commission data.
Foreign investors recorded a net fund inflow for the the third consecutive month, and analysts said the move served as one of the most important drivers of first-quarter local equity market gains.
The TAIEX rose nearly 560 points in the first quarter, Taiwan Stock Exchange data showed.
During the period, foreign investors bought NT$165.66 billion (US$5.41 billion) worth of local shares, the data indicated.
Also on the back of large fund inflows, the New Taiwan dollar appreciated 1 percent last month and more than 6 percent in the first quarter against the US dollar, the highest quarterly growth in nine years.
Last week, the NT dollar declined 0.87 percent against the greenback from the previous week, closing on Friday at NT$30.601 in Taipei trading, central bank data showed.
The TAIEX closed at 9,873.37 points on Friday, down 0.25 percent from the previous session, after recovering most of its early losses caused by US missile strikes against Syria.
Despite active bargain hunting, especially late in the session, investor sentiment remained cautious on the eve of the earnings season out of concern that a stronger NT dollar dampened the earnings of export-oriented technology firms in the first quarter, market watchers said.
The commission’s data showed that listed companies suffered a combined NT$133.9 billion in foreign exchange losses last year, as the NT dollar appreciated about 2.4 percent against the US dollar.
Mega International Investment Services Corp (兆豐國際投信) analyst Alex Huang (黃國偉) said investors should pay close attention to contract chipmaker Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) and smartphone camera lens supplier Largan Precision Co’s (大立光) earnings conferences on Thursday for their first-quarter results and for guidance for the second quarter.
“Fears have been rising that foreign exchange losses will hurt many high-tech firms’ bottom lines,” Huang said on Friday.
While the TAIEX has stayed above the 9,800-point level since the middle of last month, the market is in a “danger zone,” a Macquarie Capital Ltd client note issued on Tuesday last week said.
“The TAIEX has peaked at or above 9,800 four times this century. The first time was on Feb. 17, 2000 (10,202), but that year it ended 54 percent down from its peak. The second time was on Oct. 29, 2007 (9,810), but it pulled back 23 percent within 3 months. The third time was on April 27, 2015 (9,973), but it pulled back 26 percent within four months,” Macquarie said.
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