Local market expected to make gains before CNY
December 29, 2013, 12:07 am TWN
TAIPEI, Taiwan -- Shares in Taiwan are expected to move higher before the market closes Jan. 28 for the upcoming Lunar New Year holiday, as the local bourse has become technically healthier after overcoming strong technical resistance at around 8,500 points, analysts said yesterday.
As foreign institutional investors return to the trading floor after the Christmas holiday period to bring more funds into the local market, the weighted index could test 8,800 points or even 8,900 points before the market closure, the analysts said.
The benchmark weighted index on the Taiwan Stock Exchange closed up 0.57 percent Friday at 8,535.04 points, the highest level since Aug. 2, 2011, when the index finished at 8,545.72 points.
The last trading day of the local equity market before the Lunar New Year holiday will be Jan. 27, with trading resumed Feb. 5.
Li Sui-jia, a manager at the Taishin 2000 High Technology Equity Fund, said the future performance of the local bourse will largely depend on whether Wall Street continues to move higher.
After the U.S. Federal Reserve announced Dec. 18 that it will start to cut back its monthly US$85 billion bond-buying program by US$10 billion, the moderate pace of the U.S. central bank's tapering-off has led Wall Street to repeatedly hit record highs in recent sessions.
Since Dec. 18, the Dow Jones Industrial Average rose almost 2 percent to 16,478.41 points Friday on the back of improving economic data, including hiring, home sales and gross domestic product growth.
The tech-heavy NASDAQ, which has high correlation with the bellwether electronics sector in the Taiwan market, closed slightly shy of a 13-year high Friday.
Li said that with the impact from uncertainty over the Fed's policy fading, Wall Street is likely to continue its uptrend, which could reinforce investor confidence in other global financial markets, including Taiwan's.
Even if the market attention shifts to when the Fed will start to hike interest rates, Li said, the U.S. central bank is unlikely to raise its key interest rates until 2015, so market volatility due to such rate hike concerns could be short-lived.
Li said that as long as Wall Street keeps moving ahead and remains high in the first quarter of next year, the momentum of the local bourse is likely to continue after breaching 8,500 points.
Analysts said Apple concept stocks, which refer to those of companies in Apple Inc.'s supply chain, cloud technology-related stocks and 4G-related stocks are likely to have better chances of gaining on solid demand.
In addition, they said, after recent consolidation, the financial sector and China concept stocks, which have close business ties with China, could attract bargain hunters.