The TAIEX hit a seven-year high yesterday as it closed above the 9,000-point mark after an investment house increased the weighting on Taiwan's market in its portfolio and the government announced several favorable policies.
The rise above 9,000, however, may not be sustained as uncertainties like rising oil prices and the release of the first-half financial reports in the middle of this month could cast a shadow over the bourse, an analyst said.
The weighted index yesterday gained 72.78 points, or 0.80 percent, to close at 9,068.98, its highest since June 2000, after breaking 9,100 during the session on turnover of NT$196.36 billion (US$6 billion).
Futures due this month rose by 81 points to 9,053.
Overseas investors continued their buying spree and bought a net of NT$15.1 billion of shares yesterday, bringing overseas net purchases to NT$27.97 billion since Monday.
"The robust momentum resulted from the stronger-than-expected US stocks and the release of policies conducive to a bullish local market," Mega Securities (
The Cabinet added to the momentum by announcing details of a multibillion-dollar urban renewal project and a plan to relax the land value incremental tax, moves that are expected to stimulate the property sector and equity market.
Citigroup Global Markets gave the stock market another boost when it increased its weighting on the Taiwan market by allocating another 2 percent of of its portfolio to the local bourse.
"The market remains attractively valued relative to its history on price-earnings and price-book value ratio ... and earnings growth in Taiwan this year is 23 percent, almost twice the Asian average," Citigroup Global Market's chief Asian strategist Markus Rosgen said in a research note released yesterday.
Last week, the US brokerage raised its rating on the local equity market to overweight from underweight and suggested that investors switch their investments from Singapore to Taiwan.
However, Huang appeared less optimistic about short-term market prospects.
"We remain cautiously positive [about the market] toward the end of this year. The strong momentum today does not necessarily mean a long-lasting impetus," Huang said.
The TAIEX could meet strong resistance at 9,100 points and fluctuate above 8,600 points by the month's end, he said.
Huang attributed his conservative stance to uncertainties such as the strengthening of crude oil prices, which could again spark inflation and investor hesitation before the release of the US companies' first-half financial results in the middle of this month.
Mega Securities said it expected the TAIEX to peak at 9,700 in October, driven by high seasonality and continued capital momentum as the central bank continues its run of interest rates hikes.
Mega suggested that investors switch their targets from upstream high-tech stocks, such as integrated circuits design houses, to downstream hardware makers.
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