Taiwanese stocks are likely to move in a narrow range this week as uncertainty in the local elections has been replaced by the standoff on the Korea Peninsula as the major factor influencing investor sentiment, analysts said.
The TAIEX shed 0.45 percent to close at 8,312.15 on Friday as investors became cautious ahead of Saturday’s special municipality elections, widely considered to be a test of the Chinese Nationalist Party’s (KMT) normalization of trade ties with China.
The KMT is expected to press ahead with efforts to improve cross-strait trade after retaining seats in Taipei City, Sinbei City and Greater Taichung in line with market expectations.
“The main index may open higher on Monday after the elections left the political map intact,” said Julie Chang (張珠梨), head of the investment department at Allianz Taiwan Life Insurance Co (安聯人壽).
“The election results help assure policy continuity,” Chang added.
The TAIEX ended six points higher last week, from a week earlier, after fluctuating in a tight range on an average turnover of NT$101.4 billion (US$3.29 billion), Taiwan Stock Exchange data showed.
The benchmark, however, is not expected to climb much as external factors, notably the tensions on the Korean Peninsula, may sideline investors.
Eric Lai (賴建承), a stock analyst at Marbo Securities Consultant Co (萬寶證券投顧), expects the TAIEX to suffer if Korean tensions flare up.
“The market sentiment, already affected by Europe’s debt woes, may sink further if the Korean drama becomes more violent,” Lai said by telephone.
Even if the region regains calm, Lai said the TAIEX may meet -resistance when approaching the 8,500-point mark in the absence of strong catalysts.
The economy is set to slow in the coming months after expanding 12 percent in the first nine months, as high unemployment in the West will weaken Christmas demand for Taiwan-made electronic products, Lai said.
The analyst expects the stock index to move between 8,200 and 8,500 points for the rest of the year and challenge the 9,000-point level in the first quarter next year.
“Some investors will take profit when the TAIEX nears 8,500,” Lai said.
Electronics, which lagged behind the main index in the last months because of a global tech correction cycle, may stage a mild comeback driven by demand from China ahead of the Lunar New Year.
Alan Tseng (曾炎裕), an analyst at Capital Securities Corp (群益證券), said makers of smartphones, notebook computers, flat panels and semiconductors benefited from rotation buying last week and the trend may last early into the first quarter next year.
“Investors may find their valuations attractive compared with financial and non-tech shares,” Tseng said by telephone.
Tseng does not expect the election outcome to impact the local bourse for long.
“I will not be surprised if the index ends down on Monday on profit-taking,” he said.
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