Bargain hunting helps domestic market jump back from early losses
CNATAIPEI -- Shares in Taiwan ended higher Friday as bargain hunting emerged, helping the local market reverse its early losses that were caused by a plunge on Wall Street overnight, dealers said.
August 17, 2013, 12:04 am TWN
The bellwether electronics sector gained and old economy stocks made a comeback.
In particular, “China concept stocks,” which have close business ties with the mainland, rose in tandem with shares listed in Shanghai, on speculation that Beijing would allow state-owned companies to sell stakes to resolve local fiscal difficulties, dealers said.
However, lingering concerns remained over global demand for high-tech devices, after several heavyweights in that sector reported disappointing results for the second quarter, dealers said.
The weighted index closed up 37.74 points, or 0.47 percent, at 7,925.00, after moving between 7,850.49 and 7,949.43. Turnover totaled NT$72.81 billion (US$2.43 billion) during the session.
The market opened down 0.41 percent in the wake of a 1.47 percent dive on the Dow Jones Industrial Average overnight on fears that the U.S. Federal Reserve would decide on an early exit from its massive bond-buying program, dealers said.
After the index fell close to the nearest technical support at around 7,800 points, bargain hunting emerged to vaunt the index above the previous closing level by the end of the session, dealers said.
“Even before the drop on Wall Street overnight, the local market had been suffering losses in the past two sessions,” Horizon Securities analyst Benson Huang noted. “That's why some investors were willing to pick bargains.”
Huang said China concept stocks rode the wave of the uptrend in the Shanghai market, leaving their early losses behind.
Nan Ya Plastics Corp. gained 0.85 percent to close at NT$59.00, off an early low of NT$57.90, while China Steel Corp. added 1.20 percent to end at NT$25.20, off an early low of NT$24.85.
“If the speculations about the sale of stakes in state-owned enterprises in China turn out to be true, the debt problems at the local level will be solved and the China economy will benefit,” Huang said.
The bellwether electronics sector also rebounded, closing up 0.45 percent. Hon Hai Precision Industry Co., which assembles iPhone and iPad for Apple Inc., rose 0.76 percent to NT$79.10. Largan Precision Co., a smartphone camera lens supplier to Apple, finished up 0.93 percent at NT$1,085.00.
“But the gains posted by the sector were just technical in nature as investors need more sales data to judge whether the high-tech market will benefit from the peak season effects in the third quarter,” Huang said.
He said that despite the latest upside in the local market, uncertainty over what the Fed will do next is still haunting market sentiment.
“Foreign institutional investors have built up large short-position contracts in the futures market. I am afraid that they will sell in the spot market soon to profit in the futures market,” Huang said.