The local stock market rallied 4.17 percent yesterday after US President George Bush gave Iraqi President Saddam Hussein 48 hours to go into exile or face war.
The TAIEX rose 181.73 points to close at 4,539 on turnover of NT$71.88 billion.
"Within two weeks, the TAIEX may further climb up toward 4,700 points," said Stan Chang (張世錚), an analyst with EnTrust Securities Co.
Stocks including Asian shares also responded well to the news with Japan's Nikkei rising 1.1 percent to 7,954.46, after earlier climbing as much as 2.7 percent.
South Korea's Kospi index and the TAIEX had their biggest rallies in four weeks.
The Kospi rose 4.3 percent with Samsung Electronics Co, which gets about 70 percent of its shares from overseas, jumping 3.8 percent to 299,000 won.
"A short war will boost global consumer sentiment and we can expect exporters to rally on the back of that improvement,'' said Kerry Goh at AIB Govett Ltd in Japan.
EnTrust's Chang said foreign investors bought a total of NT$8 billion yesterday on the TAIEX in two major chipmakers, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and United Microelectronics Corp (UMC, 聯電) -- signs of capital backflow into the TAIEX to bottom fish for gains.
TSMC yesterday closed limit-up NT$3 to NT$47 per share and UMC rose NT$1.2 to close at NT$21.2. Among other heavily traded electronics shares, AU Optronics (友達光電) gained NT$1.4 to NT$21.5, Nanya Technology (南亞) rose NT$1.3 to NT$21.1 and Winbond Electronics Corp (華邦電子) added NT$0.8 to NT$12.6.
Chang compared the rising market with the market during the Gulf War, saying "stock shares are expected to soar as the war continues and ends in a short time."
Sharing a similar view, George Wu (
"[Investor] confidence will return once a recovery is assured," Wu said.
He said that the nation's economic fundamentals were good enough to sustain a war even if it results in a slower-than-expected recovery.
Cheng Yu-cheng (
"The TAIEX may only see a great upturn in the fourth quarter," he said.
He said that current credit crunch still curbs local investment spending to limit the nation's economic growth.
But in the US, consumer confidence is expected to be boosted if the war is short.
"Expectations seem to be for a quick resolution to the war," said John Litschke at Loomis Sayles & Co in San Francisco.
"People seem to hope that the consumer will return," Litschke said.
Meanwhile, benchmarks in Singapore and Hong Kong had their biggest percentage gains in more than two months.
Singapore's Straits Times Index jumped 2.8 percent to 1,268.67, while the Hang Seng Index in Hong Kong rallied 2.3 percent to 9,007.34.
Chartered Semiconductor Manufacturing Ltd, which gets about two-thirds of its revenue from the US, climbed 3.2 percent to S$0.655.
In Hong Kong, Li & Fung Ltd, which buys Asian-made garments on behalf of US companies, climbed 3.3 percent to HK$7.75.
Bond yields were slightly lower while the dollar held to large gains it made against major currencies on expectations that a US-led war with Iraq would begin and end soon.
"The market appears to be pricing in a war that brings a quick victory and minimal problems," said Michael Wilson, chief investment officer at Ausbil Dexia in Sydney.
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