The local stock market is continuing last week’s upward spiral, ending yesterday’s trading at a near three-year high in a surge that signaled that investors have — temporarily at least — shaken off the political crisis over the cross-strait service trade agreement after the mass protests against the government’s handling of the pact ended peacefully on Sunday. The index’s rally is a result of the movement against the pact initiated by student protesters who have occupied the legislature since March 18.
Building on the 2.3 percent gains registered last week, the TAIEX yesterday rose 0.27 percent to 8,873.15 — a level not seen since the summer of 2010.
Turnover rose to NT$90.394 billion (US$2.97 billion) — approaching the healthy NT$100 billion benchmark — with foreign investors buying a net total of NT$8.94 billion in local stocks.
Clearly, investors have regained confidence in the local bourse and are gradually returning to the market after a short period of volatility caused by the student-led sit-in at the Legislative Yuan complex in Taipei. Students occupied the legislative chamber to block the passage of the service trade pact, which they — along with many others — fear will jeopardize the nation’s economy and job market.
During the first week of legislative siege from March 18 to March 21, the TAIEX plunged 154 points, eliminating NT$533.37 billion from the market value, data compiled by the Financial Supervisory Commission showed.
The commission had warned about the adverse financial impact from the legislative siege, saying that political uncertainty would impede the country’s economic growth and hamper investor interest.
However, the commission’s fears do not appear to be coming true, as evidenced by the benchmark index’s surge.
The financial sub-index and tourism sub-index did edge lower yesterday, by 0.04 percent and 0.68 percent respectively, but this is because it is these sectors which stand to benefit from the trade deal, as it would allow local finance companies to hold up to 51 percent of brokerages in China’s Fujian and Guangdong provinces, as well as in the Chinese cities of Shanghai and Shenzhen.
The domestic electronics sector — the pillar of Taiwan’s economy — would likely bear little to no impact from the service pact, since local electronics makers have long been operating in highly competitive and liberalized markets around the globe, said a MFC Global Investment Management (Taiwan) fund manager who declined to be named.
The electronics sub-index rose 0.57 percent yesterday, with shares of Taiwan Semiconductor Manufacturing Co (TSMC) advancing 0.84 percent to hit a fresh record high, bringing the firm’s market value to NT$3.1 trillion. TSMC is the highest-valued stock traded on the local bourse.
The fund manager forecast the TAIEX would continue rising, hitting 9,000 points in the first half of the year and climbing to the 9,200 mark in the second, adding that electronics stocks in the cloud-computing and 4G sectors are his firm’s top picks.
The forecast will not be revised unless “the legislative occupancy continues for another two months, which is very unlikely,” he said.
It does seem that the stock market will not be severely affected by non-financial factors after going through the short period of volatility because of its healthy fundamentals, as evidenced by its track record.