The TAIEX jumped 86.83 points yesterday to close at 6,975.26, an increase of 1.3 percent and its highest close in four years, boosted by overseas investors who pumped in a record NT$19.4 billion.
The gain was led by semiconductor makers such as Taiwan Semiconductor Manufacturing Corp and United Microelectronics Corp, which gained 3.9 percent and 6.7 percent, respectively.
"I think the TAIEX will definitely top 7,000 tomorrow [Wednesday]," said Peter Hsieh (謝杰良), manager of Polaris-Protime Securities Consultant.
"Foreign cash, rather than the presidential election, has apparently become the major influence on the stock market," he said.
Foreign investors have been accelerating their investment in the market as local industries pick up in line with the continuing recovery of global economy, Hsieh said.
The recent appreciation of New Taiwan dollar against the US dollar has also helped lure overseas investors, drawing money out of other Asian markets to Taiwan, he said.
As of yesterday, overseas investors have bought a total of NT$126.05 billion in stocks on the TAIEX this year, according to the Taiwan Stock Exchange Corp.
In contrast, local investors appear more conservative, with many planning to hold onto their money until after the election, he said.
Against this backdrop, Hsieh predicted the TAIEX will surge to as high as 7,200 points before the election and continue to rise to 7,400 over the next six months.
Stanley Yeh (
However, he thinks political factors are still likely to cool down the market in the short term after the election and political uncertainties could keep investors on the sidelines.
But if the global index compiler Morgan Stanley Capital International decides to upgrade Taiwan to developed market status in its global equity indexes after the election, there will be more foreign capital flowing into the market, Yeh said.
"As a whole, I think investors can expect a bumper year," he said.
Both Hsieh and Yeh are upbeat about finance, electronics and raw material stocks.
Finance stocks should hit their stride as banks clear their bad loans amid a wave of consolidation in the sector, which is expected to enhance cost-effectiveness, Hsieh said.
Semiconductors and flat-panel makers will continue to drive the market as demand for the both product rises worldwide, they said.
AU Optronics Corp and four other local makers of liquid-crystal displays (LCD) will account for 49 percent of global spending on LCD-making this year, overtaking South Korea as the world's largest LCD supplier, researcher DisplaySearch said last week.
Raw material stocks have bounced back to the list of blue chips, owing to the shortage of building materials such as steel and gravel, Yeh said.
China Steel Corp shares, for example, have risen 20 percent from NT$29 per share last month to NT$34.9 yesterday. Last week the company raised steel product prices by an average of 20 percent.
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