Local bourse boosted by US budget bill passage

Interest featured select large-cap stocks, in particular Taiwan Semiconductor Manufacturing Co. (TSMC), which was reported by local media to be supplying chips made using the 28-nanometer process to Apple Inc. later this year, they said.

“China concept stocks,” which have close business ties with China, also attracted buying after Beijing reported an expansion in manufacturing activity, the dealers added.

The weighted index closed up 79.72 points, or 1.03 percent, at 7,779.22, after fluctuating between 7,715.26 and 7,793.48 on turnover of NT$78.26 billion.

The market opened up 0.50 percent on hopes that the U.S. House of Representatives will follow the Senate's lead by passing a budget bill to keep an income tax cut from the Bush era for most U.S. people, the dealers said. The rising trend got stronger after the House approved the bill.

MOF Head's Optimism

Chang Sheng-ho, finance minister, yesterday said Taiwan stocks have cleared two hurdles: one being the U.S. fiscal cliff crisis, and the other being the European debt crisis.

“Stocks will have a strong 2013,” he said.

Separately, foreign investors have expressed their optimism for Taiwan stocks, with seven of them predicting the TAIEX will hit 8,000 this year.

The seven are Goldman Sachs, UBS, Barclays Capital, Credit Suisse, Citibank, CLSA and HSBC. Among them, HSBC is the most optimistic, saying the TAIEX may hit 8,500 on the back of a predicted 15-percent rise in global stocks.

The 8,500 mark has been referred to by local investors as the “heavenly cap” that will be impossible to surpass, due to the collection of the stock capital gains tax. According to the stock capital gains tax law, the tax will be imposed on those who sell their holdings after the TAIEX passes 8,500.

Despite the tax, which took effect Jan. 1 and will be filed on taxpayers' returns next year, foreign investors still expressed their optimism due to many positive factors.

“The deal reached between the White House and the U.S. Congress to avert the fiscal cliff austerity measures will boost investors' optimism, which is expected to prop up stocks from now till the Chinese New Year's,” said Lin Chao-huan, chairman of J.P. Morgan.

The Chinese New Year break will begin on Saturday, Feb. 9 this year and will last nine days.

Other analysts expressed a similar view, saying the resolution of the fiscal cliff crisis, coupled with the earnings potential of Taiwan enterprises, will boost investment by foreign investors, whose positions in Taiwan stocks are still relatively low.

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