Six months ago, concerns about the eurozone debt crisis, a property bubble in China and escalating tension between North and South Korea had many investors worried. Indeed, the benchmark TAIEX shed more than 1,300 points, falling from 8,395.39 points on Jan. 19 to 7,032 on May 25.
However, the stock market then rallied in the second half of the year and the TAIEX closed at a year-high of 8,972.5 points, the highest in 31 months.
The market was buoyed by the continued inflow of foreign capital and repatriation of overseas funds by Taiwanese businesspeople during the second half of last year, amid a generally upbeat economic outlook.
Last year, Taiwanese shares rose 9.58 percent, which was higher than the 5.32 percent increase on Hong Kong’s Hang Seng Index, but lower than the 21.94 percent jump on South Korea’s KOSPI. China’s Shanghai Composite Index, meanwhile, dropped 14.31 percent, the worst performer in Asia.
Data from the Taiwan Stock Exchange show that the total market value of local stocks increased NT$2.78 trillion (US$91.5 billion), or 13.21 percent, last year to NT$23.81 trillion, translating into an increment of approximately NT$867,000 for each of the 3.2 million investors who traded shares last year. In 2009, the gains were about NT$3.01 million for each of the country’s investors.
If the calculation is based on the 8.67 million people who have opened securities accounts, each investor made an average profit of NT$320,000 last year. In 2009, the average was NT$1.09 million.
Nevertheless, many investors remained cheerful last year, with worries about jobs and spending apparently distant memories.
Shares in traditional industries such as retailing, transportation, automobiles and textiles became mainstream equities on the local bourse, and other domestic demand plays like tourism, food-manufacturing and construction also fared well, thanks in part to the warming trade ties across the Taiwan Strait.
On the other hand, shares in electronics firms, a mainstay of Taiwan’s export sector, only rose 2.41 percent last year, while those in semiconductors, computers and peripherals rounded out the year with a fall of up to 3 percent, in the face of the appreciating NT dollar.
Although the TAIEX’s yearly apex of 8,972.5 points on Dec. 31 was still 3.47 percent below its 2008 high of 9,295.2 — an indication that the market has yet to return to its level before the global financial crisis — many people are optimistic that the stock market will continue its moderate upward trend this year, and expect the nation’s economy to continue to grow steadily.
Ultimately, whether the market continues its bull run will depend on external conditions as much as the tug of war between foreign capital inflows and the central bank’s efforts to curb currency speculation. Like other export-reliant economies in the region, increased capital inflows will drive up the value of the NT dollar, which will further push up domestic property prices and weigh on electronics exporters.
Moreover, rising raw material and fuel prices also point to possible inflationary pressures that could undercut consumers’ desire to spend. In other words, the central bank needs to be particularly careful when introducing credit-tightening measures, to prevent jeopardizing the tentative economic recovery.