Diminishing Y2K fears and the NASDAQ's record-breaking advance in the US helped Taiwan stocks pierce the psychologically important 8,000-level last week.
Many analysts expected foreign institutional investors to withdraw from the market prior to the Year 2000 change-over. But as of Friday, these investors had bought a net NT$25 billion in stocks for the month of December, according to the Taiwan Stock Exchange. Other foreign investors had purchased a net NT$6.7 billion for the month.
After rising 0.8 percent in the Dec. 13 to Dec. 18 period, the TAIEX soared 5.4 percent last week to finish Friday at 8,219.45. The OTC index, which is more heavily weighted with technology shares, rose 5.5 percent to 201.50 on Friday, a new high for the year.
"All the negative factors that have stopped the market from moving to the bullish side have had less of an impact," said Grace Li, research manager at investment house MasterLink Securities Corp. "The market is starting its bullish drive."
Chief among those negative factors, Li said, were concerns that Y2K fears would force foreign institutional investors onto the sidelines until all was clear. Retail investors -- who account for roughly 90 percent of the market's turnover -- often take their cues from foreign institutions and, as a result, were also expected to wait out the changeover.
"But as [retail investors] witnessed the buying signs getting stronger, they started buying stocks they wanted to hold in the next quarter," Li said.
Another anticipated negative factor that has yet to materialize was a flameout of US stocks. After the tech-heavy NASDAQ composite index smashed through the 3,000 mark on Nov. 3, a little more than a month later it broke through the 4,000-level in intraday trading Thursday. A strong performance on the NASDAQ is seen as a bullish indicator for Taiwan stocks.
Retail investors had also feared the US economy would collapse next year, Li said, but economic data doesn't seem to support those expectations now, as the signs point to growth in 2000, albeit at a slower pace than this year.
"Now they expect next year will be a soft landing" in the US, Li said. "This is another factor that encouraged people to buy Taiwan stocks."
Li said she expects the bullish phase to continue, with the TAIEX reaching the 9,000-level in the month of January. She anticipates the index will see 11,000 by the end of next year.
The TAIEX has advanced 28 percent so far this year, while the OTC index has climbed 21.5 percent.
There are three days of trading left in the year, as markets will be closed between Thursday and Jan. 3 during the Year 2000 changeover.
Li said she anticipates stocks will trade in the 8,200 to 8,400 range between today and Wednesday.
Let the chips rise as they may
Over the last two weeks, strong spot prices for 64 Mbit DRAM has helped boost the shares of companies that manufacture the chips.
Since Dec. 10, Winbond Electronics (
The gainers also have included Powerchip Semiconductor, which rose 23.2 percent over the past two weeks to NT$53.50 Friday, and ProMos Technologies, which climbed 18.8 percent higher to NT$85. Vanguard International wasn't too far behind with a 14.8 percent rise, finishing last week at NT$37.10.
"At the moment the spot price is still roughly US$8.50, and that's maybe better than expected," said Steve Lin, equities analyst at National Securities Corp, who recommends Windbond as a "buy."
Lin said investors had earlier anticipated the spot price would continue to fall from its high of US$20.90 reached in October. But because DRAM prices appear to have settled at US$8.50, well above manufacturing costs of US$4.50, buying of local DRAM stocks has picked up again.
According to the American IC Exchange, the benchmark 64 Mbit DRAM traded between US$8.53 and US$9.04 as of Dec. 23.
"What stopped people from buying Winbond over the last two months was the seasonal factor," said Grace Li, of MasterLink, referring to the traditional lull that hits the industry in the first quarter of each year.
Li said some investors had been expecting spot prices to fall to between US$5 and US$6, but now that the price appears to have formed a floor at about US$8, "earnings are going to witness strong growth."
What's more, demand is forecast to stay strong, Li said, as "the cycle trend is upward for the next two years."
Li said MasterLink recommends Windbond as a "strong buy," with a long-term price target of NT$100 to NT$120 per share. National Securities forecasts Windbond will hit NT$90 a share next year.
In an October research note to investors, Lin said Windbond's revenues for this year would come in at NT$28.3 billion, with earnings of NT$3.4 billion. He now expects earnings to be NT$4 billion for this year.
Next year promises to be an even better one for Windbond, Lin said, as he anticipates earnings to hit NT$10 billion. This is based on continued strong demand next year and improved manufacturing technology, which will allow Winbond to produce 64 Mbit DRAM at a lower cost of US$3.50 per die.
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