Alexa
  • Directory of Taiwan

Local bourse expected to face more volatility in 2015 amid rate hikes

Local bourse expected to face more volatility in 2015 amid rate hikes

Taipei, Jan. 3 (CNA) Shares in Taiwan are expected to be more volatile in 2015 as concerns over a rate hike cycle to be kicked off by the U.S. Federal Reserve later in the year will make investors more cautious, market analysts said Saturday. David Chu, chairman of Hua Nan Securities Investment Management, is one of the cautious analysts who believes that higher interest rates could impose an adverse impact on Wall Street and in turn affect the performance of other global equity markets, including Taiwan. The Fed announced in October 2014 an end to its six-year bond buying program as the U.S. economy showed signs of a strong recovery. The world's largest economy grew a stunning 5 percent in the third quarter of last year. While the Fed said it would be "patient in beginning to normalize the stance of monetary policy" in its last policymaking meeting in December, the market has widely anticipated that the U.S. central bank will start to raise its key interest rates by mid-year. Chu said that higher interest rates, which will drain liquidity from the market, are expected to bring in more risks for equity investors to leave the local bourse moving in a more volatile way this year. A plunge in international crude oil prices is expected to post more threats to Wall Street, where energy stocks have suffered heavy losses, and other equity markets are expected to feel the pinch of any major pullback of the U.S. market, he said. The weighted index on the Taiwan Stock Exchange closed up 695.75 points or 8.07 percent in 2014, at 9,307.26 points. The closing level hit a new high in 25 years on the back of strong foreign institutional buying. Chu said that the comparison base of 2014 has been high, so it should be no surprise if share prices here face stiff technical resistance this year, adding that it is not likely for the weighted index to challenge 10,000 points over the year. However, Kevin Lin, vice president of online investment consultant firm caizischool.com, said that he still has faith in the local bourse on hopes that major market players will continue to come back to the trading floor after the Legislative Yuan approved an amendment to postpone the implementation of a capital gains tax for three years to 2018. Lin said that as the U.S. economy staged a strong rebound, Taiwanese exporters which ship most of their goods to the U.S. could outperform the broader market. With a steep fall of international crude oil prices, Lin said that auto and textile firms could benefit from either falling fuel costs or lower production costs to boost their profitability, Lin said. But the analyst admitted that the local bourse will have a more volatile year in 2015 after the gains seen a year earlier. (By Esme Jiang and Frances Huang)


Updated : 2021-09-22 14:55 GMT+08:00