The TAIEX yesterday spiked 2.1 percent, or 159.25 points, to 7,738.05, as the US Federal Reserve’s latest bond-buying program fueled expectations of a liquidity-backed rally, pushing the benchmark index to a five-month high.
Turnover surged to NT$133.5 billion (US$4.53 billion), from NT$82.2 billion on Thursday, with across-the-board gains on inflows of hot money, which sent the local currency rising to NT$29.469 against the greenback, its strongest close since May 11, Taiwan Stock Exchange (TWSE) and central bank data showed.
“The Federal Reserve’s announcement of a third round of quantitative easing [QE3] will benefit Asian bourses as global funds seek to take advantage of the region’s relatively strong economy,” JPMorgan Asset Management (摩根富林明投信) fund manager James Yeh (葉鴻儒) said.
Yeh expects a sustained, six-month rebound, with the market rising an average of 17.34 percent in the previous two quantitative easing cycles.
The Fed also announced on Thursday that it would keep the federal funds rate at zero to 0.25 percent at least through the middle of 2015 and purchase an additional US$40 billion a month in mortgage-backed securities.
The Fed’s move, aimed at invigorating the US housing market, will inevitably drive up raw material, commodity and other asset prices with the printing of more US dollars, Yeh said.
Institutional investors have been building up their position since last week in anticipation of QE3, he said.
Foreign funds bought a net NT$15.77 billion in local shares yesterday, while net purchases by proprietary traders and mutual funds were NT$2.56 billion and NT$676.17 million respectively, TWSE figures showed.
Altogether, the benchmark index picked up 4.22 percent this week, led by gas and fuel stocks at 8.13 percent, market data showed.
The advent of the high season for consumer electronics will also help the local bourse, especially for technology firms that will be launching new-generation products and suppliers of critical components, said Sunny Chung (鍾兆陽), a fund manager at Allianz Global Investors Taiwan Ltd (德盛安聯證券投信).
Shares in smartphone maker HTC Corp (宏達電), which plans to unveil a new premier product next week, closed up at the daily 7 percent limit at NT$296.50, while Hon Hai Precision Industry Co (鴻海精密), which assembles iPads and iPhones for Apple Inc, soared 4.95 percent to NT$97.60.
“While the iPhone 5 failed to surprise the market, it may still sell well given the new features,” Chung said. “Companies in Apple’s supply chain may receive a boost in shipments and revenue.”
Fidelity Investments and Schroder Investment Management Taiwan Ltd agreed that the Fed’s quantitative-easing measures would be favorable to Asian bourses and that investors may raise their holdings.
Jenny Lai (賴惠娟), head of research at HSBC Securities Taiwan, said that QE3 was expected to prompt more foreign funds to enter the local bourse and further lift share prices.
Anticipating that buying would spread to small and medium-cap electronics stocks, such as companies in the Apple supply chain, after the launch of the iPhone 5, the TAIEX is likely to move higher to 8,000 in the near term, Lai said.
In addition to the Fed’s stimulus measures, China’s announcement last week that it would pour more than 800 billion yuan (US$127 billion) into transportation infrastructure will further boost liquidity in the region, said Jim Hung (洪進揚), head of research at PNB Paribas Securities Taiwan.
Taiwan, South Korea and China are expected to benefit from ample liquidity, giving the TAIEX a good chance to challenge the 8,000-point mark, he said.
Additional reporting by CNA
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