Taiwan stocks yesterday showed new signs of shaking off the impact of a devastating earthquake as huge net buying by foreign funds and a rebound in the recently battered financials ensured a solid closing rise.
Brokers said they expected further gains today and in the coming week, with the index testing toward 7,800-8,000.
Wall Street's overnight gains, rising plastics prices and the end of what had been massive post-earthquake selling by local mutual funds also helped sentiment, brokers said.
PHOTO: REUTERS
The TAIEX closed at 7,694.99, up 96.20 points or 1.27 percent from Thursday's 7,598.79 point close. Yesterday's turnover was slightly more active at NT$107.2 billion, but lower than Thursday's NT$123.7 billion.
The TAIEX rose from the open and briefly pushed above 7,700 points to an intraday high of 7,704.76, boosted chiefly by strong net buying by foreign funds.
Foreign funds, which had been net stock buyers throughout the market's post-quake selloff, continued to show confidence in the island's fundamentals -- buying a net NT$7.7 billion on Thursday.
Brokers said local investors were cheered by the vote of confidence as well as by overnight gains on Wall Street, where the recently weak Dow Jones index rebounded 1.21 percent and the technology-laden NASDAQ index, a closely watched barometer for Taiwan's technology shares, rose 0.58 percent.
Since Monday, the first day of trading after the earthquake, brokers have noted a divergence between local investors, who sold, and bargain-hunting foreign funds.
Yesterday saw a change of heart among Taiwan investors.
"Foreign funds have shown persistent buying in post-quake trade," said Oliver Fang, institutional sales chief at National Securities. "Their huge net buying on Thursday strengthened local investors' confidence on Taiwan's economy."
Brokers expected more gains ahead as exports, particularly electronics, plastics and textiles, are beginning to enjoy strong fourth-quarter cyclical sales.
"With plastics and electronics sectors entering their hot-sale season, the index should be capable of testing higher at 7,800 or above," Fang said.
Brokers said the market appeared to have digested the negative impact of the earthquake, which caused billions in damage and losses.
"After recent falls, the index should have discounted the negative impact of the earthquake," said Beyond Asset Management president Michael On. "I believe the index will gradually begin a firming trend to test 8,000 resistance."
Local mutual funds appeared to have halted their selloff, buying a net NT$851 million in shares on Thursday compared with net selling of NT$4.12 billion on Wednesday.
Plastics surged 6.26 percent, with most such shares up their daily seven percent on news of increases in product prices.
"Demand for plastics products should rise further in the hot-sale fourth quarter," Fang of National said.
SinaPac Securities recommended further buys on Taiwan Styrene, saying price hikes for styrene monomer would boost the firm's monthly profits by more than NT$100 million. Taiwan Styrene was limit up to NT$45.9.
Financial shares, which had fallen sharply for four straight sessions due to worries about earthquake-related losses, rebounded 0.79 percent. China Development Industrial Bank rose NT$0.6 to NT$48.8.
After falling hard early in the week, financials were hit anew on Thursday by the finance ministry's decision to leave the burden of destroyed collateral on banks' shoulders.
Heavily weighted high-technology shares, whose fourth-quarter outlook remained sound despite the earthquake, rose only 0.17 percent as institutional investors diverted funds to plastics, financials and other sectors, brokers said.
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