Local stock market makes a comeback on futures-led buying
CNATAIPEI--Shares in Taiwan staged a technical rebound to return to 8,200 points Friday as foreign institutional investors propped up share prices in the spot market in a bid to earn profits in futures, dealers said.
September 28, 2013, 12:05 am TWN
Buying focused on large cap stocks in both the old economy and electronics sectors, such as Formosa Plastics Corp. and Taiwan Semiconductor Manufacturing Co. (TSMC), the dealers said.
However, the construction sector came under pressure amid fears that the central bank will raise its key interest rates in the fourth quarter at the earliest after the bank left interest rates unchanged for nine quarters in a row, they added.
The weighted index closed up 46.00 points, or 0.56 percent, at 8,230.68, after moving between 8,207.72 and 8,244.86, on turnover of NT$73.95 billion (US$2.50 billion).
The market opened up 0.46 percent in a knee-jerk reaction to gains posted by Wall Street overnight on the back of a better-than-expected jobless claim report in Washington, the dealers said.
Momentum continued before sporadic profit taking emerged to cap the uptrend at the end of the session with the index moving closer to the nearest technical resistance level of around 8,250 points.
“Foreign institutional investors had built up long position contracts in the futures market. So they tended to boost share prices in the spot market to pocket gains in futures throughout the session,” Hua Nan Securities analyst Henry Miao said.
Among the gaining market heavyweights, which attracted the majority of buying in the session, TSMC, the most heavily weighted stock in the local market, rose 1.48 percent to close at NT$103.00, with 26.15 million shares changing hands.
Meanwhile, Formosa Plastics Corp. added 0.91 percent to end at NT$77.50, and Nan Ya Plastics Corp. rose 1.77 percent to close at NT$63.30, while Cathay Financial Holding Co. gained 1.19 percent to end at NT$42.60 and Mega Financial Holding Co, closed up 1.65 percent at NT$24.60.
Bucking the uptrend of the broader market, the construction sector fell amid fears over interest rate hikes by the central bank after Perng Fai-nan, governor of the bank, said a day earlier that the public should not expect interest rates to stay low forever after concluding a quarterly policymaking meeting.
Perng's comments raised concerns that the central bank could boost its key interest rates in the next policymaking meeting scheduled for December.
In the sector, Kindom Construction Corp. fell 7 percent, the maximum daily decline, to close at NT$35.75, and Highwealth Construction Corp. shed 3.18 percent to end at NT$64.00.
“I do not think the central bank will raise interest rates so soon, as the economy still needs a push from ample liquidity. The losses suffered by these property stocks were overshooting, and it is possible for them to have a rebound next week,” Miao said.
Smartphone vendor HTC Corp. also underperformed the broader market, falling 2.99 percent to close at NT$130.00 amid lingering concerns that the company will not be able to achieve its third- quarter sales target.