The local bourse closed up 1.09 percent yesterday in heavy trade, hitting an almost 29-month high on further inflows of foreign funds, dealers said.
Interest was mainly in old economy stocks on expectations that a rising local currency would boost domestic asset values, they said.
The TAIEX rose 91.49 points to close at 8,449.34, after moving between 8,420.65 and 8,458.47, on turnover of NT$154.27 billion (US$5.11 billion).
The market opened 1.04 percent higher after an overnight rally on Wall Street, and the buying momentum continued until the end of the session as gains on other regional markets kept up interest in the local bourse as more foreign funds flowed into Asia, the dealers said.
A total of 2,729 stocks closed up, 1,406 were down and 344 were unchanged.
The construction sector scored the highest gains, up 4.3 percent. Pulp and paper stocks rose 3.5 percent, textile shares added 3.4 percent, plastics and chemicals gained 3.1 percent and the foodstuff sector closed up 1.9 percent.
Financial stocks rose 1.4 percent, machinery and electronics shares added 0.5 percent and the cement sector closed up 0.4 percent.
“Judging from the New Taiwan dollar’s rise this morning, I think foreign investors continued to move funds into the local bourse, helping the index conquer the technical barrier at 8,400 points,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said.
Hsu said the strong foreign interest came in the wake of the US Federal Reserve’s announcement that it would pump US$600 billion into the US economy by buying Treasury bonds until the middle of next year.
“As inflows of foreign funds continue from the US, I do not expect such liquidity-driven gains to stop anytime soon,” Hsu said.
Amid the ample liquidity, the strength of the local currency will be further enhanced against the US dollar to boost the asset value of domestic demand-oriented old economy stocks, particularly property development firms, Hsu said.
“So we saw a strong showing in the construction sector today, “ Hsu said. “The non high-tech sector is expected to serve as a driving force to the future upswing.”
However, bellwether electronics stocks appeared lackluster amid fears that the NT dollar’s strength would hurt exports, he said.
Among property developers, Hung Ching Development Co (宏璟建設) added 6.98 percent to close at NT$18.40, Kuo Yang Construction Co (國揚實業) rose 6.82 percent to NT$23.50 and Kindom Construction Corp (冠德建設) gained 4.56 percent to NT$29.80.
In related news, UBS has raised its year-end target next year for the benchmark TAIEX to 9,200 from 8,650, citing an “incremental improvement” in the operating environment in Taiwan.
In a report dated yesterday, UBS Taiwan research head William Dong (董成康) also raised the brokerage’s ratings for the semiconductor sector to “overweight” from “neutral” and for the hardware sector to “neutral” from “underweight.”
ADDITIONAL REPORTING BY BLOOMBERG
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