TAIPEI — The local bourse staged a mild technical rebound yesterday from a slump seen a session earlier as profit taking emerged to compromise early gains after the index briefly breached the 8,000 point level, dealers said. The weighted index closed up 24.66 points or 0.31 percent at 7,894.36, after moving between 7,862.11 and 8,013.46, on turnover of NT$$147.58 billion.
The market opened up 1.35 percent and moved to the day’s high after buying was triggered by the latest improving U.S. economic data, including weekly initial jobless benefit claims and housing starts for January, dealers said.
However, the strong gains in early trade prompted many investors to lock in profit and retreat from the trading floor to watch closely how the European finance ministers will deal with the debt problems in Greece in a meeting slated for Feb. 20, they said.
“After the market suffered a 1.69 percent slump yesterday, the market has become a bit technically shaky,” Mirae Asset Management analyst Arch Shih said.
“In particular, technical resistance has appeared strong ahead of 8,000 points. And that’s why many investors rushed to pocket their gains after witnessing the index jump this morning,” he said.
Shih said the recent strong showing of the bourse was primarily driven by ample liquidity, boosting many small and medium cap stocks which lack solid fundamentals.
“I prefer to say the recent significant gains were sort of speculative and it is expected that the market will go through consolidation for some time to digest further downward pressure,” he said.
Shih said the bright side of the market was that foreign institutional investors still keep their money in the local market, referring to a rising Taiwan dollar.
“I expect investors will target large-cap stocks, such as Taiwan Semiconductor Manufacturing Co. (TSMC), with strong fundamentals, as they resume buying in the local bourse,” Shih said. Shih said investors had better keep alert over the debt crisis in the eurozone, which could send ripples through the global financial markets.
The paper and pulp sector scored the highest gains among the eight largest sectors of the market, finishing up 1.92 percent. Plastics and chemicals rose 0.93 percent, construction shares added 0.42 percent, cement stocks gained 0.3 percent, and the machinery and electronics sector closed up 0.26 percent.
The financial sector closed unchanged, while foodstuffs lost 0.22 percent and textiles fell 0.6 percent.