Fears of market consolidation in the days leading up to Chinese New Year proved unfounded last week, as Taiwan stocks moved on to higher levels.
Traditionally, companies and individuals need cash to fill red envelopes, and so usually there is little money around to buy stocks. But that hasn't been the case so far this year.
After climbing 0.7 percent in the Jan. 17 to Jan. 21 period, the TAIEX soared 4.1 percent last week to 9,636.38. The Over-the-Counter index climbed 4.3 percent to 245.05.
"This year is a little bit different because there's a lot of cash around," said Janet Hu, equities analyst of EnTrust Securities. Hu said the central bank has been keeping the liquidity flowing, which in turn has helped support stocks.
"It's possible -- but not very possible -- to go over 10,000 this week," Hu said, though the TAIEX is more likely to trade between 9,500 and 9,900.
Jovi Chen, equities analyst for China Securities, said the strong performance of stocks last week comes as retail investors anticipate an even stronger performance later in the year.
"Everybody wants to position themselves in advance," Chen said.
Foreign institutional investors continued to be enthusiastic buyers last week, purchasing a net NT$16.55 billion for the week through Friday. For the month through Friday, these investors have purchased a net NT$43.90 billion.
In addition to electronics, analysts have been upbeat on petrochemicals -- as the cyclical industry is in the midst of an upturn -- and financial shares, as consolidation is expected in the industry this year.
The latest beneficiary of consolidation has been MasterLink Securities (
MasterLink Securities
Jan. 29 share price: NT$29.10
Shares outstanding: 737 million
Estimated 2000 earnings per share: NT$2.444
Estimate 2000 price-to-earnings ratio: 11.90
On Friday, word got out that the brokerage plans to buy Chia Heir (
The stock market will be closed for six days for Chinese New Year beginning on Feb. 2. Trading will resume trading on Feb. 8.
Though analysts expect a good New Year for Taiwan stocks based on fundamentals, there is another factor weighing positively on investors' sentiment. This year is the year of the Golden Dragon, which comes around only once every 60 years.
"Looking long-term, people are confident that the year will be prosperous," said Naiwen Kerr, assistant vice president of Taiwan International Securities.
Though his firm sticks to traditional valuation methods, "we welcome the positive sentiment,' Kerr said.
And while the speculation is based purely on superstition, there just might be something to it, Kerr said jokingly. Last year was the year of the rabbit, and many thought the market would jump around. "So when you look at the charts, it does look like that was true," Kerr said.
Foreign premium
The American depository receipts of Taiwan Semiconductor Manufacturing Company (TSMC,
Though the ADRs of TSMC finished Friday at US$54.31, practically unchanged for the week, they have dropped 24.56 percent since setting their record high Wednesday.
Still, as each ADR is worth five local shares, US investors continue to pay roughly 65 percent more for TSMC compared to local investors; TSMC closed at NT$200 Saturday in Taiwan trade, up 7.5 percent for the week.
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