Movements on international stock markets during the four-day Mid-Autumn Festival would add uncertainty to the TAIEX when it resumes trading today, ahead of policy meetings by Taiwan’s central bank and the US Federal Reserve this week, analysts said.
The Dow Jones Industrial Average lost 614.41 points, or 1.8 percent, on Monday, while the tech-heavy NASDAQ Composite dropped 2.2 percent amid worries over a property bubble in China and the Fed’s expected tapering of its bond purchase program.
However, the Dow Jones futures and the NASDAQ 100 Futures recovered nearly 1 percent yesterday after investors dismissed worries that a possible default by China Evergrande Group (恒大集團) might have a domino effect on the world as Lehman Brothers Holdings Inc’s bankruptcy did in 2008.
Capital Securities Corp (群益證券) analyst Alan Tseng (曾炎裕) said that Beijing would take measures to prevent Evergrande’s woes from spiraling into a systemic financial crisis.
Taiwan’s financial institutions have a small exposure of NT$2.21 billion (US$79.68 million) to Evergrande, the Financial Supervisory Commission said last week.
The TAIEX closed down 0.01 percent at 17,276.79 on Friday, with turnover of NT$310.74 billion, Taiwan Stock Exchange data showed.
Last week, the average daily turnover on the main board stood at NT$269.59 billion, the lowest since the beginning of this year, which analysts attributed to concerns that the Fed might tighten monetary policy after the two-day US Federal Open Market Committee (FOMC) meeting this week.
Allianz Global Investors said investors should pay close attention to the FOMC meeting for more clues about when the Fed would start to taper and when a rate hike cycle would begin.
Any move or information from the Fed would affect global financial markets, Allianz said.
Growing interest from foreign institutional investors would lend support to the TAIEX after the long weekend, said Bevan Yeh (葉獻文), fund manager at Prudential Financial High Growth Fund, as foreign institutional investors bought a net NT$4.47 billion of shares on the main board last week.
Still, before the holiday, investors had turned cautious over reports of electronics order cancelations and global monetary policymakers’ intentions, Fubon Securities Investment Services Co (富邦證券投資顧問) said.
Fubon Securities president Charles Hsiao (蕭乾祥) said he remains positive about local shares, as local firms have shown strong earnings results.
Although some local electronic component suppliers have seen inventory adjustments on the part of customers, most have benefited from the high sales season for technology products, as well as digital transformation by global corporations and organizations, Hsiao said.
Non-tech firms selling metal products and machinery equipment have also enjoyed inventory rebuilding demand as the world emerges from COVID-19 lockdowns, he said.
KGI Securities Investment Advisory Co (凱基證券投顧) president Chu Yen-min (朱晏民) said the benefits of inventory rebuilding might extend into next year, providing the catalyst to help the TAIEX challenge 18,500 points in the fourth quarter.
The New Taiwan dollar has outperformed other Asian currencies this year, making it attractive to global funds seeking to exit Hong Kong and lending support to the TAIEX, Chu said.
Meanwhile, non-tech players might outperform the main board with an average return of 9.16 percent, if bought this quarter and held until June next year, Mega International Investment Trust Co (兆豐國際投信) said in a report on Friday.
Non-tech firms generate average returns of 9.16 percent, better than the TAIEX’s 7.98 percent gain between the third quarter and the end of June for the past 21 years, the report said, citing Bloomberg data.
Taiwan’s share prices might receive further support from the nation’s stable economic growth, after the Directorate-General of Budget, Accounting and Statistics predicted last month that GDP growth this year might reach 5.88 percent, the report said.
Share prices in tech players usually rise to relatively high levels in the third quarter, ahead of the high sales season for technology products, the report said, hinting that non-tech players boast relatively cheaper valuations.
Investors should pay attention to non-tech stocks and make purchases before their share prices climb, it said.
Additional reporting by CNA
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