Sun, Dec 12, 2004 - Page 7 News List

Market watchers expect mild correction


Stock prices are expected to rebound as political uncertainty dissolved after the opposition parties retained a majority in the legislature, analysts said yesterday.

But investors should expect the rally to be followed by a mild correction next week, said Bill Lan (藍新仁), a portfolio manager, who helps oversee a NT$5 billion fund for Jih Sun Securities Investment Trust Co (日盛投信).

"The local bourse may lose support from government funds after the ruling Democratic Progressive Party failed to grab a majority in the legislature," Lan said.

Still, in the long run, stock markets will move higher on better fundamentals, he said.

Intensifying relations with China during the legislative campaigns kept investors on hold ahead of the election, analysts said. Overseas fund managers, who tend to be cautious, have sold a net of NT$32.55 billion in local shares over the past week.

"As the political concerns dissolve, we expect Taiwan's stock market to regain momentum," Lan said.

The TAIEX may advance to around 6,300 by February, as the index has lagged far behind the US stock markets in the past month, Lan said. That would represent a gain of almost 7 percent from the current 5911.63.

The benchmark TAIEX inched 0.31 percent higher last week, bolstered by government funds, he said.

Agreeing with Lan's view, Rocky Chiou (邱正裕), an analyst with Jih Sun Securities Investment Consulting Co (日盛投顧), said, "An uptick is highly possible, if we track the historical records."

In the past five legislative and presidential elections since 1995, stock prices gained 7.56 percent on average within a month after results were announced, according to the investment consultancy's tally.

Financial shares are worth investing in due to better fundamentals, since the government is aggressively pushing for more mergers among local financial holding companies to boost competitiveness, Chiou said.

However, financial shares may bear the brunt of a short-term sell-off as the election result dashed investors' hope to see a quick passage of an amendment to expand the size of the depleted Financial Restructuring Fund (金融重建基金), he said.

The fund plays a crucial role in the government's efforts to reform Taiwan's financial sector.

On the contrary, the victory of the Chinese Nationalist Party (KMT)-led pan-blue camp will give a boost to China-related stocks, said Wu Pei-wei (吳佩偉), a fund manager who helps oversee a NT$600 million fund for ABN AMRO Asset Management in Taipei.

"The result could herald more relaxed Taiwan-China relations," Wu said. "Overall, we're bullish about the TAIEX. The worst part has passed."

Stock prices of heavyweights including leading semiconductor and liquid-crystal display (LCD) companies are expected to bounce back, as the industries should hit bottom in the first quarter at the earliest, Wu said.

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