TAIEX ends above 7,100 on Wall Street rally

The China Post news staff and CNA

The local bourse ended above the 7,100 point mark Friday as bargain hunters rushed to buy into large cap stocks after taking cues from a rally on Wall Street overnight, dealers said.

The weighted index closed up 80.73 points or 1.14 percent at 7,155.83, after moving between 7,085.92 and 7,166.08, on a turnover of NT$91.26 billion (US$3.05 billion). The buying reflected rising hopes that central banks from major economies will come up with further stimulus measures to boost the global economy, which has been affected by the financial crisis in Europe, they said.

However, market sentiment remained cautious ahead of the parliamentary elections in debt-ridden Greece scheduled for June 17 amid fears that the anti-austerity camp will win the vote and possibly engineer an exit from the eurozone, they added.

The market opened up 0.28 percent on a knee-jerk reaction to the Wall Street gains and momentum accelerated with buying focusing on market heavyweights in both the high-tech and old economy sectors to lift the index above 7,100 points at the end of the session, dealers said. “Wall Street made a strong showing overnight as many investors had high hopes that the U.S. Federal Reserve will pump more funds into the market,” Hua Nan Securities analyst Henry Miao said.

“Such optimism spread into the Asian markets, including the local bourse, prompting bargain hunters to act,” Huang said. “Select heavyweights in the local market appeared attractive in terms of their relatively low valuations.”

Among the winning large cap stocks, Formosa Plastics gained 7 percent, the maximum daily increase, to close at NT$78.80, Yuanta Financial rose 3.45 percent to end at NT$13.50, and Hon Hai Precision Industry, the world’s largest contract electronics maker, closed up 2.92 percent at NT$84.50. “I suspect government-run funds stepped into the market, picking up bargains in a bid to shore up market confidence as these stocks have long been favored by the funds,” Miao said.

However, Miao said, the European debt crisis remained a concern to many investors at home and abroad, as the situation in the eurozone will decide whether the gains will continue and how the global equity markets will move.

“The upcoming elections in Greece could decide whether the country will have a default on its piling debt and leave the eurozone,” Miao said. “If Greece exits, that could be a disaster to the global financial markets.”

At the end of the session, the plastics and chemical sector scored the highest gains among the eight major sectors of the market, finishing up 3.91 percent. Textiles rose 1.46 percent, financials gained 1.45 percent, cement stocks added 0.86 percent, and machinery and elections closed up 0.70 percent.

Foodstuffs gained 0.44 percent, while construction stocks fell 0.57 percent, and the paper and pulp sector closed down 0.08 percent.