The benchmark TAIEX closed 64.59 points higher to reach 8,972.5 yesterday, the highest closing level last year, thanks to an upbeat economic outlook amid a warming relationship with China, ample market liquidity and an appreciating New Taiwan dollar, equity strategists said.
Yesterday’s modest gain of 0.73 percent was led by construction stocks and financial shares, with a daily turnover of NT$152.53 billion (US$5.02 billion), up 19 percent from the previous session, the Taiwan Stock Exchange’s data showed.
Over the whole of last year, local shares closed out with a rise of 9.58 percent, which was higher than the 5.32 percent increase on Hong Kong’s Hang Seng Index, but less than the 21.94 percent jump of South Korea’s KOSPI index.
In comparison, Japan’s Nikkei 225 Stock Average fell 3.01 percent for the year, while China’s Shanghai Composite Index dropped 14.31 percent, Prudential Financial Securities Investment Trust Enterprise Co (保德信投信) said in a note yesterday, citing Bloomberg statistics.
“The signing of the Economic Cooperation Framework Agreement [ECFA] with China and the strong appreciation of the NT dollar were the main reasons that pushed up local shares this year, especially financial and traditional industry shares,” Prudential Financial chief investment officer Yu Jui-ming (余睿明) said yesterday.
The financial and insurance sub-index on the main bourse rose 2.43 percent to 1,041.59 points yesterday. For the full year, the sub--index has jumped 14.49 percent, the stock exchange’s tallies showed.
Meanwhile, the building material and construction sub-index, which reflects the general share performance of property shares, surged 26.65 percent over the year and rose 1.64 percent yesterday to 364.7 points, according to the exchange.
Yu said he expected the TAIEX to extend gains this year and to stay above 9,000 points if electronics shares perform strongly in the first quarter, while domestic consumption and property stocks are likely to remain attractive to investors this year.
Even so, year-end window-dressing appeared to have contributed to recent share gains, SinoPac Securities Corp (永豐金證券) said in a separate note yesterday. Based on the stock exchange’s data, the TAIEX rose 111.4 points, or 1.26 percent, in the last week of trading of last year and soared 600.02 points, or 7.17 percent, in the month.
Chuang Wen-jen (莊文仁), a manager at Taishin Securities Investment Trust Co (台新投信), said foreign capital inflows would pose a key factor for the outlook of local shares in the near term.
“If foreign capital inflows continue, it would benefit the large-cap stocks and support the overall sentiment of the market,” Chuang said yesterday.
Chuang said he expects restocking demand in China to benefit electronics shares in the next two months, although a drastic appreciation of the New Taiwan dollar could also weigh on such stocks, he added.
The New Taiwan dollar has risen 5.19 percent since the end of last year and it closed at NT$30.368 against the greenback yesterday, according to the central bank’s data. In Thursday’s trading session, the local currency surged to a 13-year high of NT$29.08 against its US counterpart amid increased foreign inflows.
The full-year rise of 5.19 percent last year for the New Taiwan dollar was bigger than the 3.59 percent rise of the Chinese yuan and the 2.62 percent rise of the Korean won, but less than the 13.32 percent rise of the Japanese yen and the 9.19 percent rise of the Singapore dollar, the central bank’s data showed.
“A fast rise in the value of the NT dollar is a negative for electronics exports and margins, which would in turn weaken Taiwan’s stock performance,” Chuang said.
However, Henry Chen (陳志恆), an investment research director at KBC Concord Asset Management Co (康和比聯投信), said the recent price surge in raw materials and base metals would cap the TAIEX’s performance in the first quarter.
“Copper is a metal that has been widely used by Taiwanese electronics makers in their production process,” Chen said in a statement yesterday. “The continual rise in copper prices would erode electronics makers’ margins and the TAIEX could meet resistance when it approaches 9,000 points.”
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