Stock to rally today, hit 8,000 in short-term: experts

Taiwan stocks have suspended trading for 11 days in a row due to the Lunar New Year break. Trading stopped two days prior to the break to leave room for settlements over the last two business days before the nine-day break.

On Feb. 6, the last day of trade, the local weighted index TAIEX closed up nearly 20 points to 7,906.65, on trade volume of NT$91.827 billion.

As for stocks' performance on the first day after the break, many experts have expressed optimism, citing historic data.

According to Capital Securities, over the past 10 years, stocks have risen on the first trading day of the Lunar New Year seven times, and the margin of increase averaged 0.4 percent.

Taiwan's macroeconomic situation may give investors a further boost of confidence, said Wu Wen-tung, chief investor with Capital.

“The fundamentals are solid,” Wu said. “The economy is expected to grow higher this year, and the economic signal issued by the Council for Economic Planning and Development shone green last December, the first time since July 2011. Historically speaking, an upward swing of the economy will take at least 12 to 18 months, and we are still at the beginning stage of the upswing. This will play out positively in stocks.”

Chung Ching-hsing, fund manager with Capital, said that the TAIEX is expected to hit 8,000 in the short term and meet technical resistance at 8,600, which may be reached in the second to third quarter of this year.

Yeh Hsien-wen, fund manager with Prudential Taiwan, also expressed his confidence, saying there is a 70-percent chance stocks will rise on the first trading session of the Lunar New Year.

“If the rally can last three days in a row, then we can pretty much expect it will last for an entire month,” he said. “Taiwan stocks have been falling behind those of other countries since the fourth quarter of last year, and foreign funds will play a key role in determining whether we will catch up.”

Chung Chao-yang, an investor with Allianz, said foreign investors' heavy purchases before the Lunar New Year break are signs that stocks will open the New Year on a high note.

“If trade volume can expand to over NT$100 billion, then we can expect strong stock performances in the times ahead,” he said.

Separately, TAIEX's weighting reductions on several indices maintained by Morgan Stanley Capital International (MSCI) are expected to produce minimal impact on local stocks, experts said.

Over the break, MSCI announced that TAIEX's weightings on the MSCI ACWI index stayed the same and reduced by 0.02 percent, 0.04 percent, 0.02 percent, 0.05 percent and 0.03 percent, respectively, on the following indices: EM, EM Asia, AC Asia, AC Asia ex Japan, and AC Asia Pacific ex Japan.

Since the reductions are marginal, they won't impact local stocks much when they open today, experts said.

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