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TSMC, UMC lead gainers as government funds buy

"In the past two days, I think [the government bought shares]. They don't want the market to fall below 4,000."

Steven Hsieh, Dresdner Asset Management Taiwan Ltd

The TAIEX posted its biggest three-day gain in six months, led by Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電), on speculation government funds bought shares to boost investor confidence.

The TAIEX rose 20.18, or 0.5 percent, to 4,320.59, bringing its three-day gain to 6.9 percent, the biggest advance for that period since January. Within the index, 220 stocks rose and 214 fell.

Four government funds this month said they will invest NT$100 billion in stocks by year-end. The government doesn't comment on whether its funds are buying stocks or whether it has directed local money managers to buy shares.

"In the past two days, I think" the government bought shares, said Steven Hsieh, who manages NT$2.6 billion (US$74 million) in Taiwan stocks at Dresdner Asset Management Taiwan Ltd.

"They don't want the market to fall below 4,000," which would be the lowest level in eight years.

Still, gains were limited after Standard & Poor's cut the nation's credit rating to "AA," its third-highest rating, from "AA+." The outlook remains negative, S&P said.

A total of NT$74.71 billion in shares traded today, the busiest trading session since June 13. The index gained 2.4 percent in the week.

TSMC rose NT$3, or 5 percent, to NT$63.50. Harvey Chang (張孝威), the chief financial officer at TSMC, said the company expects to make a profit in the third-quarter even though the industry is in a "severe downturn."

United Microelectronics Corp (UMC, 聯電) rose NT$0.80, or 2.2 percent, to NT$37.90 on hopes it can boost its profitability in the third-quarter.

TSMC and UMC together account for more than 20 percent of the market value of the TWSE Index. Government funds usually buy the biggest stocks as it will help prop up the index.

China Development Industrial Bank (中華開發銀行) rose NT$0.10, or 0.5 percent, to NT$22.30.

Chunghwa Telecom Co Ltd (中華電信) fell NT$0.70, or 1.6 percent, to NT$44.60.

Hua Nan Commercial Bank (華南銀行) fell NT$0.30, or 1.9 percent, to NT$15.80. The bank said chairman Edward Chien (簡弘道) hadn't been replaced by vice chairman Lin Ming-cheng (林明成) as reported by a Chinese language newspaper.

Some banks fell after S&P said the nation's non-performing loans are 10 percent of total loans compared to the government estimate of less than 6 percent.

Chinatrust Commercial Bank (中國信託銀行) fell NT$0.50, or 2.6 percent, to NT$19. First Commercial Bank (第一銀行) fell NT$0.20, or 1.4 percent, to NT$14.40. International Commercial Bank of China (中國商銀) fell NT$0.30, or 1.9 percent, to NT$15.60.
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