Stocks ended at their highest level in over three years yesterday, as strong gains in financial stocks sparked a rally across the board, analysts said.
Speculation of merger and acquisition deals boosted financial shares, which account for 39 percent of the market's trading volume.
The TAIEX closed up 112.23 points, or 1.7 percent, at 6549.18, its highest level since Sept. 28, 2000.
Advancers beat decliners 607 to 205, while 145 stocks ended the session unchanged. Trading totaled NT$165.96 billion (US$5 billion).
The financial subindex surged 5.8 percent.
"The big jump in financial issues early in the session eased investors' worries about a short-term pullback," said Hsiuli Lee, an analyst at Franklin Templeton First Taiwan.
Lee said the strength in the financial sector countered the negative impact of Morgan Stanley Capital International Inc's decision to leave Taiwan's weighting unchanged in its various indexes, which was announced overnight.
Chang Hwa Commercial Bank was the most actively traded counter on the main board. The stock had a record 493 million shares change hands yesterday. It soared 6.7 percent to NT$20.8 after a Chinese-language newspaper reported that Chinatrust Financial Holding Co may take over Chang Hwa Bank.
"Financial industry reform and consolidation is a top priority of the Taiwanese government this year," said Tracy Chen, who oversees US$73 million at Prudential Securities Investment in Taipei.
"We can expect some big merger and takeover deals this year," she said.
Cathay Financial Holding Co climbed NT$4, or 7 percent, to NT$61.50. Its Cathay Life Insurance Co unit said it will pay NT$8.2 billion for land for commercial development in Taipei.
The technology sector ended the session 0.5 percent higher in lackluster trade, making up 37 percent of main board's volume.
Compal Electronics gained 0.7 percent to NT$43.7 after a major client, Dell, said on Thursday that it expected businesses to steadily increase technology spending as the economy slowly improves.
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