Taiwan's key stock index rose for a fourth day, led by Taiwan Semi-conductor Manufacturing Co (TSMC, 台積電), on expectations the central bank will follow an expected US interest rate cut later today with its own reduction to boost economic activity.
Leaving the broad market mixed, Asustek Computer Inc (華碩電腦) fell after Goldman Sachs Group Inc took the motherboard maker off its "recommend list" citing concerns about slowing sales in coming months.
The TWSE Index rose 2.41, or 0.1 percent, to 4,082.92. Within the index, 235 stocks rose and 232 fell. The index has risen 15 percent in a month, making it the ninth best performing index in US dollar terms.
Fifteen firms that trade directly with the Federal Reserve say it will cut the overnight bank lending rate by a half-point to a 40-year low of 2 percent.
The Fed has cut its key rate 4 percentage points this year, while the central bank has cut the rate charged to commercial lenders for 10-day loans by 2 1/4 percentage points since December.
"The Taiwan central bank will follow in the Fed's foot steps and cut interest rates further," said Steven Hsieh, who manages about NT$2.5 billion (US$72 million) at Dresdner Asset Management Taiwan Ltd. "This kind of good news will be the driving force for the market."
Falling returns for Taiwan dollar deposits and US currency deposits will likely prompt more investors to put money into stocks rather than bonds or cash, Merrill Lynch & Co analysts said.
The total value of trade was NT$82 billion, the highest since June 8.
TSMC, rose NT$0.50, or 0.8 percent, to NT$65.50. The chipmaker tracked its US peers higher after the Philadelphia Stock Exchange Semiconductor Index rose 2.8 percent yesterday. Goldman Sachs reiterated that TSMC shares were on the firm's "recommend list."
Asustek Computer fell NT$1, or 0.8 percent, to NT$124. Goldman analyst K.C. Kao has taken the company off the firm's "recommend list" and listed it as "market outperform." In a note to clients Kao said Asustek may see sliding sales during the last three months of this year and the first quarter of next year because computer makers have more than enough motherboard inventory. The stock is up 31 percent since its six-month low on Sept. 25.
Some computer-part makers gained on hopes a US rate cut would help spur demand for computers and electronic devices, boosting earnings at Taiwan companies. Hon Hai Precision Industry Co (
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