Shares closed 3.46 percent higher yesterday, tracking Wall Street's overnight gains after a fall in oil prices, dealers said.
The weighted index closed up 244.18 points at 7,309.83, after moving between 7,177.73 and 7,330.83, on turnover of NT$133.38 billion (US$4.39 billion).
It was the index’s highest close since it settled at 7,341.11 on July 7. Gainers outpaced decliners 1,986 to 286, with 325 stocks closing unchanged.
A total of 202 stocks closed limit-up and 21 limit-down. Traders said they expected shares to continue rising in the near term, adding that the index may test 7,500 today.
“The negative factors for stocks, such as oil prices and subprime problems, have either turned for the better or been priced in. It’s hard to see further downside for the TAIEX,” said Alex Huang (黃國偉), assistant vice president at Mega Securities Corp (兆豐證券).
Oil was trading at around US$127 per barrel yesterday — well down from record highs of above US$147 early this month.
Shares may extend their rebound from the lowest in almost two years as 104 companies buy back shares, Morgan Stanley analysts said.
History suggests a 75 percent likelihood that the benchmark TAIEX “bounces” higher in the next three months, Morgan Stanley analysts Jesse Wang (王嘉樞) and Jenny Tsai (蔡笛韻) said in a report on Tuesday, citing patterns during four previous periods of “high buyback intensity” by more than 60 companies each time.
Share repurchases are at their highest since at least the middle of 2000 and more are expected to follow, the report said.
Some 61 percent of previous buyback plans were executed, so there may be NT$15.7 billion of buying in the current boom.
The TAIEX has dropped 14 percent this year and last week fell to the lowest since September 2006.
Wang and Tsai wrote that the surging popularity of share buybacks was a reflection of local corporate managements’ gradual realization that “their share prices have possibly overshot on the downside.”
Compeq Manufacturing Co (華通電子), a maker of printed circuit boards used in mobile phones, jumped by the daily 6.9 percent limit yesterday after the company said it might spend as much as NT$158.4 million to buy back 12 million of its shares.
Powerchip Semiconductor Corp (力晶半導體), the nation’s largest memory chipmaker, and Yuanta Financial Holding Co (元大金控), owner of the nation’s largest brokerage, are among companies that have announced plans to repurchase shares.
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