TAIEX index is expected to rise over election year

Nobody can say exactly when the rally is going to kick off, but the TAIEX index, which stood at 8,500 last Friday, shows signs of an uplift.

All indications are that a bull trend is being set to begin in the not too distant future, a Prudential Financial market analyst said.

One cause of optimism is the bottoming out of the share release by Taiwan’s three big institutional investors. “That occurred,” the market analyst said, “shortly before the week ending June 12.”

A rebound is expected, of course.

The rebound certainly will be helped by the two major elections scheduled for early next year.

Voters will go to the polls to elect a new Legislative Yuan on January 12 and their new president in March 2008.

Campaign promises and government measures to back them up would get the bullish trend to continue until after the elections are over.

Analysts at the HSBC (Hong Kong and Shanghai Banking Corporation) Investments cited the long rally in 2000 as an example.

In February 1999, the TAIEX index remained as low as 5,422 points. “One year later, in February 2000, the index skyrocketed to 10,393,” one HSBC analyst said.

President Chen Shui-bian was elected on March 18, 2000.

“That feat was repeated four years later,” said another HSBC analyst.

A SARS epidemic shot down the TAIEX index to 4,044 in April 2003. Before Election Day on March 20, 2004, the stock market closed 76.4 percent higher at 7,135. SARS stands for severe atypical respiratory syndrome.

It’s the election year fever.

“Usually,” still another analyst said, “the rally starts a year before Election Day.”

It has yet to start this year. “But it’s time, the presidential election being only nine months away,” the HSBC market analyst pointed out.

Another Prudential Financial specialist is confident that hot money is likely to flow into Asian stock markets.

All Asian economies are doing well, and international investors are plowing back their money into Asia. “They have bought NT$28.222 billion more than they sold so far this month,” said the Prudential Financial specialist.

Domestic institutional investors are following suit. They bought NT$14 billion more last month.

Institutional investors are interested in buying shares of IC design and other IT-related firms listed in Taiwan. “They are shunning investment banks and real estate that carry larger risk,” the specialist added.

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