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Stocks soar more than 3% on easing political concerns

The stock market saw its sharpest spike in more than two years yesterday, as the negative impact of the nation's political uncertainty began to ease, according to market watchers.

The benchmark TAIEX gained 201.39 points, or 3.01 percent, to 6,882.48 on turnover of NT$110.75 billion (US$3.36 billion) yesterday, marking its biggest one-day rise since Aug. 19, 2004.

High-tech and financial plays were two of investors' favorites, with Lite-On Technology Corp (光寶科技), one of the nation's largest computer peripheral makers, and Chinatrust Financial Holding Co (中信金控), Taiwan's fourth-largest financial group, closing almost limit-up at NT$43.70 and NT$25.65 on the Taiwan Stock Exchange yesterday.

Foreign investors continued their buying spree, purchasing a net of NT$12.68 billion in stocks yesterday, boosting the total amount of net buying to NT$60.82 billion since the beginning of this month.

"The robust market performance indicated the declining impact of politics on investor sentiment," Alex Huang (黃國偉), assistant vice president at Mega Securities Corp (兆豐證券), said in a telephone interview yesterday.

The bullishness is expected to dominate the market through the rest of this week and lift the TAIEX to the 7,000 level or higher, before any possible further developments next week in the pan-blue camp's proposal to hold a no-confidence vote against the premier, Huang said.

The analyst suggested that investors should take profits once the benchmark index reaches his predicted level, since the political risks have not gone away.

Meanwhile, Macquarie Securities struck an optimistic note about the local market's outlook yesterday, saying in a research note that the nation's political situation could hardly get worse.

The Australian brokerage firm expects local retail investors, which account for an average of 70 percent of the daily market volume, to make a sudden return into the market, and that those with a longer-term view will be the winners.

Prudential Financial Securities Investment Trust Enterprises said that it expected the local bourse to perform better next year.

"The TAIEX may go up to more than 9,000 points next year, a 30 percent rise from a high of 7,400 points this year," Huang Su-li (黃素麗), who manages NT$1 billion of funds at Prudential Financial, told the Taipei Times on the sidelines of a media briefing yesterday.

Huang attributed her bullishness to anticipation that the government would relax its cross-strait policy around the middle of next year, with moves such as lifting the cap on China-bound investment, in the hope of winning support ahead of the 2008 presidential election.

Both Macquarie Securities and Prudential Financial recommended stocks like handset makers and their components providers, as well as property developers.

Top picks included High Tech Computer Corp (宏達電), the world's biggest handset maker running Microsoft Corp's Windows Mobile system; Hon Hai Precision Industry Co (鴻海精密), the world's top electronics contract maker, and its affiliate Foxconn Technology Group (鴻準精密); as well as Huaku Construction Co (華固建設) and Chong Hong Construction Co (長虹建設).
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