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Ample liquidity expected to drive equity market higher

Ample liquidity expected to drive equity market higher

Taipei, March 21 (CNA) With the local equity market awash in liquidity, share prices on the Taiwan Stock Exchange (TWSE) are expected to steam ahead after the weighted index hit a recent high, analysts said on Saturday. In addition to high liquidity, the local bourse is expected to benefit from a surge by high tech firms in May, amid optimism that the electronics sector, the backbone of the local equity market, will move higher over the peak season in the second half of this year. Chen Po-chen, a manager with Manulife Taiwan High Dividend Fund, said that the TWSE is expected to ride the waves of further foreign institutional buying at a time when the liquidity level is on the rise. This week, the weighted index rose 1.78 percent, closing at 9,749.69 points on Friday, a new high for the year. During the week, foreign institutional investors bought a net NT$10.74 billion (US$341 million) worth of local shares. Chen said global equity markets have moved sharply higher. Most notably, the DAX index, the main German stock market index, passed the 10,000 point mark after the European Central Bank (ECB) launched a U.S. Fed-like quantitative easing (QE) program. With the ECB's QE program, Chen said that fund spill-over effects will continue to lend support to other stock markets outside the Eurozone and Taiwan will be one of the beneficiaries. In addition, global equity markets are also likely to receive a boost from a move by the People's Bank of China (PBOC), the Chinese central bank, to cut its key interest rates and cushion the impact of moderating growth in its economy. Chen said that China, the second largest economy in the world, is expected to see gross domestic product (GDP) growth fall to 7-7.2 percent in 2015 from 7.4 percent last year. As the PBOC continues to pump funds into the market, so-called "China concept stocks" in Taiwan, which have close business ties to the mainland, could see their share prices rising and further lift the TWSE, Chen said. He added that with the slow season effects from the first quarter of this year fading, the local electronics sector is preparing for an expected increase in global demand in the second half of this year. Chen cited a survey as saying that many integrated circuit designers have placed orders to contract chip makers in a bid to meet future rising global demand, adding that strong demand could begin to appear in May or June and become even more visible in the third quarter. Investors are being advised to park their funds in electronic blue chips to take advantage of the gains posted in the high tech sector, Chen said. (By Tien Yu-pin and Frances Huang)


Updated : 2021-01-23 22:16 GMT+08:00