TAIEX surges after rate cut, lenders lead gains

Taiwan stocks rose after the central bank cut its key interest rate to a record low to boost an economy mired in its worst slump in a quarter century. Lenders such as China Development Industrial Bank (中華開發銀行) led gains.

The key TWSE Index gained 47.40, or 1.4 percent, to 3,493.66, after rising as much as 4.8 percent. Banks accounted for 68 percent of the index's gains as 256 stocks rose and 167 fell. The total value of trade yesterday was NT$44.2 billion (US$1.3 billion), up from NT$29.4 billion Wednesday.

The index's relative strength measure, derived from averaging out the daily gains and daily losses over 14 days, was at 25.4 Wednesday, below the reading of 30 that indicates an index is poised to rise.

"Essentially the market is oversold," said Tu Kuei-shiong, who helps manage NT$200 million (US$6 million) in Taiwan stocks at Lian-Shan Investment Management Co in Taipei. "The market could go to 4,000 before the end of the year." Tu is buying shares in chipmakers Taiwan Semiconductor Manufacturing Co (台積電) and Winbond Electronics Corp (華邦電子).

The NASDAQ Composite Index's 5.9 percent rise, its biggest advance in almost six months, also lifted technology stocks.

Banks gained after the central bank cut the key rediscount rate, charged to commercial lenders for 10-day loans, to 2.5 percent from 2.75 percent, boosting hopes debtors can pay back their loans. "Low interest rates would help capital intensive industries and companies which have a lot of debt," said Andy Xie, chief Asian economist at Morgan Stanley Dean Witter & Co.

China Development Industrial Bank, the biggest lender by market value, rose NT$0.50, or 3 percent, to NT$17.10. Chinatrust Commercial Bank (中國信託銀行), the second-biggest lender by market value, rose NT$1.20, or 6.6 percent, to NT$19.40. Hua Nan Commercial Bank (華南銀行), the second-biggest listed lender by assets, rose NT$1.10, or 6.8 percent, to NT$17.40.

China Airlines Co (華航), the nation's biggest airline, fell NT$0.25, or 2.5 percent, to NT$9.70. EVA Airways Corp (長榮航空), the second-biggest Taiwan airline, fell NT$0.35, or 5.7 percent, to NT$5.80.

Some computer parts makers rose after the TWSE Electronic Index's relative strength index, derived from averaging out the daily gains and losses over 14 days, fell to 21.8 Wednesday, indicating electronic stocks may rise.

Acer Inc (宏電), which makes computers under its own name and for International Business Machines Corp., rose NT$0.05, or 0.6 percent, to NT$9.15. Asustek Computer Inc (華碩電腦), Taiwan's biggest motherboard maker, rose NT$2.50, or 2.6 percent, to NT$100. Hon Hai Precision Industry Ltd (鴻海精密), which makes everything in a computer except chips, rose NT$4, or 3.9 percent, to NT$107. Quanta Computer Inc (廣達電腦), the biggest computer notebook maker in Taiwan, rose NT$4, or 6.5 percent, to NT$65.50.