When investors return to the market after New Year's day, they will feel cheerful about the triumphant close of stocks last year as the benchmark TAIEX gained 90.79 points on Friday, or 1.17 percent, to close at 7,823.72 -- its highest closing level since Aug. 28, 2000.
They will probably be in the mood to buy more as they race to cash in on stronger corporate profits and expectations of smooth cross-strait relations following the government's recent relaxation initiative.
The total market value of local stocks increased NT$3.74 trillion (US$114.8 billion) last year alone to NT$19.38 trillion, which translates into an increment of approximately NT$1.14 million for each of the 3.27 million investors who traded shares in this country, Taiwan Stock Exchange Corp statistics showed. In 2005, the gains were around NT$688,000 for each of the country's investors.
What made last year notable is the fact that the stock market managed to move forward amid a myriad of downward pressures that, in the past, would have weakened investment sentiment.
Those downside elements included the first family corruption and insider-trading scandals, corporate frauds involving both Chinatrust Financial Holding and China Development Financial Holding, as well as the bad consumer loans that greatly affected bank profits and consumer spending.
The market weathered those attacks, however, which suggests investors have some level of confidence in the Taiwanese market. Annual gains of 1,275.38 points, or 19.47 percent, not only marked a stellar year compared to a yearly gain of 6.66 percent in 2005, but also the fourth straight annual rise.
Last year's performance was not necessarily fantastic, however. Across Asia, most markets rounded out a fourth consecutive year of gains by weathering stronger currencies and record-high oil prices, thanks to the continued injection of foreign funds on expectations that the region can withstand a potential US economic slowdown.
Vietnam, for instance, saw its fledgling stock market in Ho Chi Minh City grew 144.48 percent and was crowned the best-performing market in Asia. It was followed by Shanghai with 130.47 percent, Jakarta with 55.26 percent, Mumbai with 46.7 percent, Manila with 42.2 percent, Hong Kong with 34.2 percent, Singapore with 27.2 percent, Kuala Lumpur with 21.8 percent and Sydney with 19.8 percent.
The 19.47 percent annual increase in the Taipei market was good but not excellent. Taiwan Stock Exchange statistics showed that foreign investors purchased a net total of NT$558.1 billion worth of Taiwanese stocks last year, lower than the NT$719.41 billion recorded in 2005.
There are markets whose performance last year lagged far behind Taipei's. Tokyo's benchmark index gained a disappointing 6.92 percent, despite encouraging signs of an economic recovery. Seoul's key index grew a modest 3.99 percent from the previous year, after a surge of 53.96 percent in 2005. As for Thailand, plagued by political woes, Bangkok's index contracted 4.75 percent from its 2005 close.
This year, investors will be hunting for positive news and favorable policies ahead of the end-of-year legislative elections and the presidential election next year. The likelihood of continued foreign capital inflows remains -- as long as the local market has ample room to catch up with other Asian markets.