Taipei-The benchmark weighted index on the Taiwan Stock Exchange, or Taiex, could move higher to challenge the 10,000- point mark Monday after the nine-day Lunar New Year holiday on the back of a more-than 2 percent increase in the Dow Jones Industrial Average during the market closure in Taiwan, according to analysts.
The gains are forecast on expectations that the local main board in the first trading session of the Year of the Pig will play catch-up with Wall Street, where the Dow rose more than 500 points during the period when the local equity market closed for the Lunar New Year holiday.
Equity market analyst Wang Chao-li (???) said the upturn in the U.S. markets is likely to serve as a catalyst to a higher Taiex, with contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) expected to lead the gains.
Trading on the local equity market was halted Jan. 31 before the Lunar New Year holiday that began Feb. 2.
During the closure, the Dow gained 526.37 points or 2.14 percent, the S&P 500 index rose 67.88 points, or 2.57 percent, and the tech-savvy Nasdaq index gained 269.91 points, or 3.84 percent.
During the market closures in Taiwan, American depositary receipts (ADRs) of TSMC, the most heavily weighted stock in the local equity market, rose 4.01 percent, which could help the Taiex vault past the 10,000-point mark, Wang said.
On Jan. 30, the last trading session before the Lunar New Year holiday, the Taiex rose 0.67 points to close at 9,932.26 points.
In the Year of the Dog from Feb. 16, 2018-Feb. 5, 2019, the Taiex fell 488.83 points, or 4.69 percent, amid volatility in the global markets at a time of trade tension between the United States and China and a rate hike cycle by the U.S. Federal Reserve.
The losses in share prices cut market capitalization of the local main board by NT$1.33 trillion during the Year of the Dog, which translated into a loss of NT$129,000 for each investor on average. Despite the possible gains enjoyed by TSMC, Wang said a fall in ADRs of United Microelectronics Corp. (UMC), a smaller rival to TSMC, and flat panel maker AU Optronics Corp. (AUO) could prompt investors to dump the two stocks in the local main board Monday, capping the gains on the Taiex.
During the market closure in Taiwan, UMC's ADRs fell 2.13 percent, and AUO's ADRs lost 7.69 percent on the U.S. markets.
Despite the forecast of a higher Taiex Monday, Hsiao Hui-chung (???), manager of the Allianz Global Investors Taiwan Fund, warned that the Washington-Beijing trade dispute is expected to continue to create uncertainty for the global financial markets.
In addition, Hsiao said weakening global demand for tech devices, in particular the iPhone, has plunged the semiconductor industry into inventory adjustment, which has raised concern over the fundamentals of the local electronics sector.
The silver lining is that foreign investors are expected to move their funds into emerging markets, as the U.S. Fed has turned more dovish toward its monetary policy, with the momentum of the U.S. economy showing signs of slowing.
Source: Focus Taiwan News Channel