Asian stocks punched to a seven-month peak yesterday, fueled by confidence the global economy is recovering faster than expected and a further jump in Taiwanese shares on hopes for an influx of Chinese investment.
Taiwan’s benchmark TAIEX index soared 5.6 percent, taking gains to 12.8 percent in just two days as investors see a wide-reaching deal coming later in the year that would spur heavy Chinese investment in the country, especially in financial firms.
The surge in Taiwan added to the broad gains across Asia as evidence has mounted that global trade is starting to pick up, highlighted by brokerage CLSA’s gauge of Chinese manufacturing activity rebounding to a nine-month high last month.
The TAIEX opened up 4.89 percent, extending momentum from Thursday’s 6.74 percent rally after the government announced it would allow Chinese institutional investors to buy stocks listed in Taiwan, dealers said.
“Judging from the strong showing of large cap stocks, I suspect the buying largely came from foreign institutional investors,” Concord Securities (康和證券) analyst Allen Lin said.
Many of those foreign investors had not jumped on the bandwagon on Thursday as the market has a daily upside ceiling of 7 percent.
The financial sector led the gains on expectations that Taiwan and China would soon set up a mechanism to deal with the increasing exchanges between banks from the two sides, dealers said.
“Foreign institutional investors are still building up their positions, in particular, in financial stocks. Their buying is likely to continue,” Lin said.
Lin said investors have expected a strong Chinese economy would help Taiwan ride out the global economic downturn.
“It is possible for the index to challenge the key 7,000 point mark during the month,” he said.
Investors in the region have largely brushed aside worries that the global H1N1 flu outbreak could turn into a serious pandemic.
“On the other hand, we have China’s PMI data, which seems to signal continued recovery for the economy, yet another reason to stay bullish,” said Castor Pang (彭偉新), strategist with Sun Hung Kai Financial (新鴻基金融集團) in Hong Kong.
The Australian dollar, seen as the bellwether for risk-taking, struck a seven-month peak.
South Korean exports and industrial production improved more quickly than expected, suggesting that regional exporters must step up activity after slashing inventories.
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