TAIEX clears 7,100 as euro debt worries ease
July 28, 2012, 12:09 am TWN
TAIPEI -- The local bourse closed above the 7,100-point mark yesterday as sentiment toward the debt situation in the eurozone improved to some extent after the European Central Bank said it would do whatever it takes to preserve the euro, dealers said.
The high-tech sector staged a strong rebound throughout the session, led by market heavyweights such as Hon Hai Precision Industry, which assembles iPhone and iPad for Apple, and Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip-maker.
The improved sentiment toward the European financial crisis prompted investors to return to the trading floor and boosted the daily turnover to above NT$70 billion at the end of the session, dealers added.
The weighted index closed up 153.80 points or 2.20 percent at the day's high of 7,124.49, off an early low of 7,045.31. Turnover totaled NT$75.50 billion during the session.
Rallies Across Asia
The upbeat sentiment was felt all over Asia, with rallies seen in Japan, Hong Kong, and South Korea, where the main index had risen by over two percent.
Locally, the market opened up 1.29 percent as investors took cues from a rally on Wall Street overnight after the ECB President Mario Draghi indicated that the bank was determined to protect the euro, dealers said.
The electronics sector regained its footing after a recent slump and the momentum continued until the end of the session, while buying also spread to the old economy sector and the financial sector to push the index even higher, dealers said.
"The local bourse had been consolidating for some time amid lingering concerns over the global economy," Grand Cathay Securities analyst Mars Hsu said. "Investors simply seized the ECB's comments to hunt bargains today."
With the ECB's commitment, the market now widely expects the bank to resume buying in bonds from debt-ridden euro countries in a bid to bring down borrowing costs, which have jumped significantly in recent sessions, dealers said.
"We should pay close attention to the next ECB policymaking meeting next week to see what the bank will really do after its latest promise," Hsu said.
Among the winning high tech stocks, TSMC rose 3.93 percent to NT$79.30, Hon Hai Precision moved up 3.73 percent to NT$83.50, and smartphone vendor HTC ended 3.94 percent higher at NT$290.00.
"Despite the gains posted by the electronics sector, uncertainty over global demand still remains," Hsu said. "I prefer to say today's rally was technical in nature as investors rushed to hunt bargains for trading purposes."
Hsu said investors should also keep an eye on the U.S. Federal Reserve's next policymaking meeting, also scheduled for next week, to gain a clearer picture of what the U.S. central bank will do to help the fragile economy.
"As there are few signs of any immediate economic recovery, I expect the local bourse will encounter stiff technical resistance ahead of 7,200 points over the next few sessions," Hsu said.
At the end of the session, the machinery and electronics, and cement sectors scored the highest gains among the eight major sectors of the market, finishing up 2.5 percent.
Plastics and chemicals rose 2.4 percent, textiles and financials gained 1.8 percent, foodstuffs grew 1.2 percent, construction stocks added 0.8 percent, and the paper and pulp sector closed up 0.3 percent.