Stocks are expected to rally this week on anticipation the ruling DPP's victory in Saturday's elections will quell squabbling in a legislature previously dominated by the KMT, analysts said yesterday.
"We expect to see the market rise for a day or two, since the election results are likely to bring more peace in the legislature after the DPP gained greater control," said Gary Chu, analyst at Dresdner RCM Global Investors Securities Investment Consulting Co.
The DPP was expected to build a coalition with its pro-independence ally the Taiwan Solidarity Union, which won 13 seats, and other independents, Chu said.
"The DPP-led coalition is anticipated to provide more stability in the legislature, where a firm opposition synergy between the KMT and its offshoot People First Party (PFP) is unlikely," Chu said.
However the DPP government's lack of administrative experience may continue to hinder its ability in policy-making, said Fuh-Hwa Securities Investment and Trust Co (
In the week ahead, Hung said the market would rise briefly on anticipation of more harmony between the DPP administration and the legislature, but it may soon come under pressure from profit-taking.
"There is a good chance of a technical correction since most stocks have already garnered hefty profits in recent months," he said.
The TAIEX has already gained nearly 30 percent in the past two months on the back of stronger US markets and ample liquidity from recent rate cuts, he said.
"Once the election results are factored in, the market is expected to follow the movement on Wall Street," Chu said.
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