Taiwan shares boosted by IMF's pledge to support European banks
October 7, 2011, 10:12 pm TWN
TAIPEI -- Taiwan share prices got a boost yesterday amid improved sentiment after the International Monetary Fund (IMF) pledged to inject funds into European banks to weather the impact of the debt problems in the eurozone, dealers said.
The IMF's bank recapitalization plan prompted buying to rotate to large cap financial stocks, which had been under downward pressure recently amid concerns over their exposure to the debt problems in Europe, dealers said.
The IMF move has helped investors at home leave behind, for the moment at the least, fears of a possible default by debt-ridden Greece, and has propelled the local bourse to a level above 7,000 points again, they added.
The weighted index closed up 142.85 points, or 2.04 percent, at 7,132.00, after moving between 7,094.61 and 7,170.92, on turnover of NT$95.53 billion.
The market opened up 1.81 percent and moved to the day's high on the back of rallies on Wall Street and the European markets overnight, dealers said.
The momentum extended until the end of the session on active rotational buying in financial shares and large cap stocks in the old economy sectors, as concerns eased over the debt crisis in Europe, dealers said.
The plastics and chemical sector scored the highest gains, finishing up 4.57 percent. Cement stocks rose 3.25 percent, foodstuffs gained 3.05 percent, financials added 2.8 percent, and textiles closed up 2.15 percent.
The construction sector rose 1.97 percent, paper and pulp stocks added 1.02 percent, and machinery and electronics shares closed up 1.0 percent.
"The jump of the index to above the psychological 7,000-point mark right after the market opening helped to bring more buying back to the market, especially with the IMF's pledge," Grand Cathay Securities analyst Mars Hsu said.
"Therefore, bargain hunters resumed buying in financial stocks, which have been market laggards, and made the gains on the broader market sustainable throughout the trade," Hsu said.
But, Hsu said, as worries over the European debt conditions and a possible doubt dip recession in the U.S. have not disappeared, turnover failed to expand significantly in line with the share price gains.
"Many investors have retreated from the trading floor and have stayed at bay, waiting for the U.S. September non-farm payrolls data Friday to obtain a clearer picture of the global economy," he said.
In the financial sector, Chang Hwa Bank rose 4.32 percent to close at NT$16.90 and Mega Financial gained 4.52 percent to end at NT$20.80.