The nation's benchmark index rose 257.79 points yesterday to close at 5,103 points on new government incentives and news of intervention.
But Premier Chang Chun-hsiung (
The market recovered 5.3 percent on turnover of NT$73.5 billion, from NT$45.6 previous day.
A 151-point drop in the NASDAQ Composite Index on Monday also affected early trading yesterday.
But the bourse soon began to recoup Monday's losses, encouraged by strong buying of Taiwan Semiconductor Manufacturing Co (
Further buying euphoria was seen after rumors circulated after 10:30am that the administration was poised to announce more bullish policy news for investors. At 11:30am, the share prices of TSMC, UMC and Chunghwa Telecom all rose to the daily upward-limit, with buying orders far exceeding selling orders in most shares. Many electronics shares prices shot up from their down-limit to up-limit during the trading. As many as 103 shares closed at limit-up yesterday.
Although the policy rumor did not come true, talk in the market was that the bullish measures could be three links with China, mergers of financial institutions and a large sales tax reduction. The speculation helped boost investor confidence, market watchers said.
Finance Minister Yen Ching-chang (
"It's not [investor] psychology or poor performance of the listed companies or even poor prospects in the domestic economy," said Yen. "I think it's because of non-economic factors. In order to regain investor confidence, I suggest investors should buy stocks [now]."
"The six measures announced [on Monday] are to revive the stock market, since investor confidence has been greatly weakened," said Yen. "However, since the economic fundamentals have not changed ... and the correlation between US and Taiwan stocks is not entirely clear, [therefore] investors should not trade based on the performance of the US stock market."
Asked whether the administration might consider eliminating intervention and let the market ride, Yen said that he understood the limitations of artificial intervention.
"When the psychological barriers in the market have been removed and investor confidence is regained, the market could then revert back to its natural mechanism," explained Yen.
"The six new measures will help. But if there is a gigantic non-economic factor [which affects investor confidence], the administration would have to intervene. However, the Ministry of Finance also understood its limitation [of intervention]. The best way is that everyone buys stocks."
But one analyst disagreed with Yen's buying philosophy, saying the market's bottom may still be a ways off.
"Yesterday's rise also does not signify the end of the downward trend. The bottom is expected to be 4,200 points on the TAIEX before year-end, according to our analysis, said Henry Cheng (
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