A shopping spree by four government-backed investment funds over the past few days may suggest that the TAIEX is about to hit rock bottom, and may indicate a good time to bottom fish for future gains.
"Now is a good time to buy shares as long-term returns are foreseeable," George Wu (吳裕良), an analyst with Primasia Securities Co, said yesterday.
Wu said that the government-backed funds were active on Tuesday, injecting at least NT$1 billion to prop up the TAIEX, which has fallen due to uncertainties over a potential war in Iraq.
Since last Friday, state-run banks used the funds to snap up over NT$2 billion in chip and financial-sector shares, said Stan Chang (
The four government-backed funds are the Civil Servant Pension Fund, Labor Pension Fund, the Labor Insurance Fund and the Postal Savings Fund.
The TAIEX yesterday finished up 67.7 points, or 1.6 percent, to close at 4,328.15 on turnover of NT$41.13 billion.
Prior to war breaking out, the TAIEX is expected to continue its slide, but is likely to stay above 4,200, Chang added.
"The declining volume of trade means there's not much room for the TAIEX to plummet further," Chang said.
Analysts also said that the low volume of trade means that the government-backed funds would have an easier time influencing share prices.
Wu said indications are the government intervened to boost shares including those of domestic steel makers following Chou Chin Industrial Co's (久津實業) insider trading scandal and China Steel Corp's (中鋼) failure to meet domestic demand.
However, if war starts next week and ends in a short period of time, the TAIEX may begin to rebound, both Chang and Wu said.
Chang expects that the TAIEX will reach 5,000 in September while Wu believes it will likely reach 6,000 by year's end.
"The upward movement will continue until early next year when the presidential elections are held," Chang said.
But James Huang, (
He also said that the TAIEX hitting 6,000 is only attainable if the economic recovery in the second half of the year moves ahead.
Chang said that recent cash flows showed that investment has moved from traditional industries to the high-tech sector. He suggested that blue-chip companies worthy of investment in the long term include memory chipmakers and emerging financial holding companies.
Stable profitability may still be found in traditional industries such as the shares of Formosa Plastics Corp (
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