Despite a chaotic year last year, most investors in the TAIEX bid farewell to the Year of the Horse in a joyful mood. The local bourse ended 0.35 percent higher on Friday last week — the last trading day before the Lunar New Year holiday. The benchmark index closed at 9,529.51 for the lunar year as a whole, representing an increase of 1,066.94 points, or 12.61 percent, from the Year of the Snake.
Friday’s closing figure of 9,529.51 marked the highest level that the local bourse has ended on on the last trading session of the lunar year in 15 years. This has raised many investors’ expectations for the Year of the Sheep, as, based on data from the previous 20 years, the stock market has a 75 percent chance of moving up on the first trading session after the Lunar New Year holiday, despite uncertain macroeconomic conditions around the world.
In the Year of the Horse, the total market value of local stocks increased by NT$3.45 trillion (US$109.6 billion), or 14.29 percent, to NT$27.59 trillion, translating into an increment of approximately NT$365,000 for each of the 9.43 million investors who held securities accounts last year.
However, some pundits have said that the idea that each investor earned an average profit of NT$365,000 last year is extremely unrealistic, because foreign institutions have become the major investors in local stocks, while many Taiwanese investors have lessened their equity holdings in the face of increased costs.
Take Taiwan Semiconductor Manufacturing Co (TSMC) as an example: The market value of the global foundry leader rose by NT$1.13 trillion — the largest among all listed companies — to NT$3.85 trillion on Friday, after its shares increased by 41.42 percent to NT$148.5 during the Year of the Horse. As foreign investors currently hold more than a 78 percent share of the company, it means that local investors have not enjoyed the same level of share gains in TSMC as their foreign peers.
Indeed, foreign investors also reap higher profits from the bellwether electronics stocks — which registered a 23.44 percent increase in the Year of the Horse, the largest gain among the eight major sectors on the local bourse — because they hold a significantly larger stake in some market heavyweights in this sector, such as smartphone camera lens supplier Largan Precision Co, handset chip designer MediaTek Inc and major iPhone assembler Hon Hai Precision Industry Co.
Therefore, the assumption that every investor raked in handsome profits in the local market throughout the Year of the Horse is misleading, as individual participation in the local market is declining. One may ask: Has the stock market not rewarded its enthusiastic investors as it is wraps up a solid year? Theoretically, yes, perhaps; but realistically, not so much for Taiwanese investors.
This paradox is entirely logical once people realize that the local bourse’s trading volume has contracted by 10 percent over the past decade as retail investors are not attracted to Taiwanese shares. While Taiwanese investors have increasingly aspired to buy into China and other overseas markets that allow them to access potential targets in a far more lively and interesting way, foreign institutional investors now play an increasingly critical role in the local market.
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