The nation's main stock index began to show signs of life yesterday as investors -- emboldened by strong overnight gains in the US market -- felt confident enough to buy shares.
The TAIEX surged 323.50, or 6.37 percent, to 5,404.78 yesterday, with 438 shares gaining ground and just 12 falling. Turnover was NT$66 billion.
Stocks were helped by a 7.79-percent rise in the tech-heavy NASDAQ Index on Thursday, which climbed on the back of Microsoft Corp's 19-percent gain.
In addition, the Philadelphia Semiconductor Index -- which acts as a bellwether for Taiwan's bread-and-butter industry -- skyrocketed a whopping 17.2 percent. That helped chip firms such as Taiwan Semiconductor Manufacturing Co (台積電) and United Microelectronics Corp (聯電), both of which closed limit-up yesterday.
Some market watchers said a package of six emergency measures announced by the Ministry of Finance late Thursday night may have contributed to the rise.
The measures included halving to 3.5 percent for two weeks the daily downward volatility limit on stock movements; allowing foreign investors to own as much as 75 percent of a listed company, up from 50 percent; allowing individual foreign investors to buy as much as US$1.5 billion in shares, up from US$1.2 billion; imposing stricter rules on the short-selling of stocks; and relaxing rules on margin accounts to allow investors more flexibility in dealing with margin calls.
In addition, insurance firms will be allowed to own as much as 10 percent of a listed firm and will be required to keep less funds on hand in special reserves.
Fundamentals aside, positive signs on the political front may have also given investors reason to feel confident, analysts said.
President Chen Shui-bian (陳水扁) and People First Party Chairman James Soong (宋楚瑜) met on Thursday night, raising hopes that the DPP and oppositions parties will begin to cooperate on domestic policy.
Still, despite the 6.37-percent rise yesterday, analysts remain unsure whether the gain will turn into a sustained rally or merely a "dead cat bounce" -- a technical rebound.
"Whether the TAIEX will test 5,000 points in the near term is largely dependent on the performance of the US market," said Henry Cheng (
"Until the rise in TAIEX can be confirmed over the next few days, yesterday's 6.37-percent jump can only be treated as a technical rebound.
"The market is likely to consolidate between 5,000 points and 6,000 points next week," he said.
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