Foreign investors increase purchases of Taiwan shares

Michelle Hsu, The China Post

Despite Standard & Poor’s (S&P) negative report on Taiwan’s national credit rating, foreign investors continued buying Taiwan shares last week, with net purchases for the week amounting to around NT$10 billion.

S&P last Thursday announced the downgrading of Taiwan’s long-term credit rating from AA+ to AA due to the island’s shrinking IT (information technology) hardware exports and mounting overdue loans at banks, estimated to have exceeded NT$1 trillion.

Though, the stock market sustained a rally during the last three trading days of last week. Last Friday, it gained 20 points to close at 4,320 points, exceeding the average levels of both the last six and the last 12 trading days. Net purchases by the three major institutional investors — foreign investors, mutual fund companies and securities companies — during last Friday alone reached NT$5.8 billion, of which NT$4.79 billion was contributed by foreign investors. The statistics compiled by the Taiwan Stock Exchange (TSE) showed that purchases by foreign investors during last week was focused on large-cap electronics shares such as Taiwan Semiconductor Manufacturing Corp. (TSMC), United Microelectronics Co. (UMC), Asustek Computer, VIA Technology and Hon Hai Precision.

During a conference to report its financial conditions to institutional investors last Wednesday, TSMC’s chairman Morris Chang said that the company’s operations had hit the bottom in the second quarter, and will start to rebound during the third quarter. Such a remark fostered confidence among foreign investors in the semiconductor industry. Three major foreign securities Solomon Smith Barney, Morgan Stanley and Credit Suisse First Boston (CSFB) last week all raised the targeted share price of TSMC.

Taiwan’s other leading IC wafer foundry UMC also experienced a rise in its share price on active foreign buying. In addition to the rises in their shares listed on the TSE, both TSMC and UMC also saw rallies in the prices of their ADRs (American Depositary Receipts) listed on the New York Stock Exchange (NYSE).

The recent active foreign buying is considered a major bullish force boosting market performance during the past week. However, since the signals for economic recovery remain unclear, a sharp market rally is not expected for this week. Though the daily turnover expanded to exceed NT$70 billion last Friday, mounting selling pressure was seen during the last few minutes before the market closed, casting a shadow over today’s market. Two other uncertain factors for this week’s market performance include the scheduled settlement of the Taiex Futures on the Singapore International Monetary Exchange (SIMEX) today and the financial report of UMC to be announced tomorrow.