President Tsai Ing-wen’s (蔡英文) landslide election victory has reinforced a winning run for Taiwan’s financial markets.
Saturday’s election results are helping extend what has been a positive period of investor sentiment for Taiwan, with the TAIEX closing up 0.74 percent at 12,113.42 points yesterday, its highest level in more than three weeks, while the New Taiwan dollar gained 0.22 percent to end at NT$29.952 per US dollar, the highest in nearly 19 months.
The yield on 10-year government bonds was little changed at 0.6456 percent.
Foreign investors bought a net NT$10.75 billion (US$358.91 million) of local stocks, the most in almost a month, Taiwan Stock Exchange data showed.
“Investors will pay attention to beneficiary stocks in the short-term,” Mega International Investment Services Co (兆豐投顧) chairman Shelly Lee (李秀利) said. “With the upcoming trade deal signing and expectations of [US] Federal Reserve easing, the bullish trend will continue for Taiwan’s markets.”
Buying in select stocks favored by Tsai’s “five plus two” industrial development policy, such as in the green energy and defense industries, got a boost yesterday, and stocks in the biotech and medical care sector were among the best performers on bets that they would continue to benefit from supportive government policies.
Century Iron & Steel Industrial Co (世紀鋼構) and Hsin Kuang Steel Co (新光鋼鐵), which are keen to invest in offshore wind power development, moved sharply higher, rising 3.42 percent and 2.39 percent respectively, to close at NT$72.5 and NT$32.1.
In terms of national defense, shipbuilder CSBC Corp, Taiwan (台灣國際造船), rose 0.95 percent to close at NT$26.5, while Aerospace Industrial Development Corp (漢翔航空) ended unchanged at NT$34.95, after coming off a high of NT$36.7 on profit taking.
A gauge of tourism stocks was the worst performer, ending 2.63 percent lower, amid concerns that the election result would further worsen cross-strait ties.
If recent history is any guide, Taiwan’s equities are poised to extend gains in the coming month. The TAIEX has climbed by an average of 7.4 percent in the 30 days after the past six presidential elections, as investor concern about political risk fades.
“Taiwan stocks tend to rise after an election, as uncertainty is removed,” President Capital Management Co (統一投顧) chairman Li Fang-kuo (黎方國) said.
He sees the TAIEX hitting a record high by April, helped by continued inflows and a strong outlook for the technology sector.
Strong foreign inflows into the technology sector have in turn helped boost the NT dollar.
The NT dollar is expected to rise to 29.5 per US dollar by year-end, driven by the appeal of companies related to 5G and further repatriation of investment, said Cliff Tan (陳仲華), head of global markets research for East Asia at MUFG Bank Ltd.
Government bonds are expected to be boosted by limited supply under Tsai’s leadership, Jih Sun Securities Co (日盛證券) trader Kevin Shih said.
However, the market would remain constrained by global trade concerns, analysts said.
“Although the United States and China are scheduled to sign a phase one trade deal on Jan. 15, many investors still want to see the contents of the agreement,” Concord Securities Co (康和證券) analyst Kerry Huang (黃志祺) said.
Additional reporting by CNA
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