The TAIEX surged 115.79 points, or 1.18 percent, to close at 9,913.28 yesterday, its highest level for 15 years, as foreign portfolio investors continued buying local shares on speculation concerning a Taiwan-Shanghai stock exchange link.
After rallying to 9,797.49 points on Thursday, the benchmark TAIEX yesterday broke the 9,900-point mark in the morning session, but pulled back to close at 9,913.28, its highest level since April 2000.
Daily turnover totaled NT$164.96 billion (US$5.31 billion), with foreign portfolio investors buying a net total of NT$46.47 billion in shares yesterday — the second-highest level of net buying ever — after a net buy of NT$22.33 billion on Thursday.
Photo: Reuters
Taiwan introduced limits on foreign investment in the corporate bond market on Tuesday, a move analysts said is aimed at curbing inflows of hot money that have pushed up the New Taiwan dollar. Foreign investment in Taiwan totaled US$70 billion in the first quarter, even with existing caps on purchases of government notes, money-market instruments and derivatives.
“There is some speculation that foreign investors will move cash to the equity market from the debt market,” KGI Securities Co (凱基證券) economist Andrew Tsai (蔡耀德) said. “The rally is supported by speculation over a Shanghai-Taiwan stock connect and fund inflows betting on the appreciation of the NT dollar.”
In the meantime, the Taiwan stock futures index yesterday touched the 10,000-point mark for the first time in 15 years before pulling back.
The stock futures index uses the TAIEX as its underlying index and analysts see the futures market as a barometer of the spot market.
“The stronger-than-expected financial results of the major listed companies in the US, as well as the Taiwan-Shanghai stock connection issue, helped stimulate capital momentum of Taiwan’s stock market,” Allianz Global Investors Taiwan Ltd (德盛安聯投信) fund manager Corrina Xiao (蕭惠中) said in a note.
Taiwan’s financial regulator has pledged to increase access to the local equity market to expand market turnover.
Earlier this week, the Financial Supervisory Commission (FSC) said Taiwan would start a cross-border stock trading platform offering to trade about 150 stocks in Singapore in July.
FSC Chairman William Tseng (曾銘宗) on Wednesday said no study was under way on the Taipei-Shanghai link, but did not rule out the possibility.
Xiao said that speculation concerning a Taiwan-China stock link helped to push up financial stocks on the local bourse in the past two sessions, but added that investors should be wary of a pull-back next week.
UBS Securities Pte Ltd’s Taipei-based equities and research head William Dong (董成康) said the establishment of a Taipei-Shanghai connect would provide a boost to Taiwanese market liquidity, not necessarily just from Chinese capital, but more importantly, from drawing on local liquidity.
However, Dong said there are still several hurdles to overcome, including working out on logistics, setting controls on capital flows, determining whether the cross-strait service trade agreement would become effective, and alleviating concerns over possible political disputes.
On the expectation of a better performance for the TAIEX in the second half of this year, UBS Securities reiterated its year-end index target of 10,600.
In addition, elections, dividends and a seasonal rise in technology shipments might serve as major catalysts for Taiwan’s equity market for the rest of this year, Dong added.
Additional reporting by Bloomberg
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