Taipei-Shares in Taiwan moved higher to close above the 12,100-point mark Wednesday after coming off an early low, as buying rotated to old economy stocks, in particular in the petrochemical sector, dealers said.
Amid ample liquidity, large-cap tech stocks remained resilient after recouping earlier losses caused by a technical correction, which helped the broader market jump over the resistance hurdle ahead of 12,100 points by the end of the session, the dealers said.
The weighted index on the Taiwan Stock Exchange (TWSE), or Taiex, ended up 25.44 points, or 0.21 percent, at 12,122.45, after moving between 12,059.92 and 12,125.90 Wednesday on turnover of NT$147.50 billion (US$4.89 billion).
The market opened down 0.30 percent and fell further in the early morning session to the day's low on a mild technical correction from a rally in the previous session, when the Taiex ended up 1.32 percent, as U.S. markets reported a marginal increase of about 0.1 percent in the Dow Jones Industrial Average Tuesday, off an earlier high, the dealers said.
However, the main board regained its footing in the afternoon session as heavyweights in the old economy sector attracted bargain hunters and large tech stocks recovered from their earlier lows, pushing the Taiex back into positive territory to end above 12,100 points, they said.
"It was a liquidity-driven market, as foreign institutional investors continued to move funds into the local market," equity market analyst Andy Hsu said.
"So even though the local main board has risen significantly in recent sessions on positive leads in global trade, investors still looked for targets for their money," Hsu said, referring to a move by Washington and Beijing to agree to a phase-one trade agreement.
According to the TWSE, foreign institutional investors bought approximately NT$5.10 billion-worth of shares Wednesday.
Hsu said that as December futures contracts were settled that day, many investors simply wanted to boost the spot market in a bid to profit in futures.
"These investors just shifted to the buy side by taking advantage of the earlier losses on the main board, picking up large-cap stocks," Hsu said.
"Today, buying rotated to old economy stocks as they had lagged behind the electronics sector for some time and looked attractive now."
Among the gaining old economy heavyweights, Formosa Plastics Corp. rose 2.42 percent to close at NT$101.50, off a low of NT$98.60, Formosa Chemicals and Fibre Corp. added 0.11 percent to end at NT$88.30, off a low of NT$87.60 and Asia Cement Corp. grew 0.63 percent to end at NT$47.95.
"In addition to ample liquidity, conglomerates in the old economy sector tended to push up share prices to dress up their books as the year comes to an end," Hsu said.
In the financial sector, which closed up 0.39 percent, also due to conglomerate buying, First Financial Holding Co. gained 1.27 percent to close at NT$23.90, Chang Hwa Commercial Bank rose 0.88 percent to end at NT$22.90 and Fubon Financial Holding Co. added 0.54 percent to close at NT$46.75.
Hsu said the bellwether electronics sector also benefited from bargain hunting, as tech heavyweights rebounded from earlier lows.
In the sector, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) fell 0.14 percent to close at NT$344.50, with 39.57 million shares changing hands, recovering from an earlier low of NT$341.50.
Also in the high-tech sector, iPhone assembler Hon Hai Precision Industry Co. rose 0.87 percent to end at NT$92.40 after hitting a low of NT$91.10, while Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., closed unchanged at NT$5,040.00 after coming off a low of NT$4,980.00.
"Although I expect that the Taiex will test 12,000 points again for technical reasons, the local main board is unlikely to see any immediate plunge on the back of high liquidity," Hsu said.
"Moreover, with the presidential election approaching in January, the government is expected to inject government-led funds to buy equities as it does not want to see a falling market, which could undermine it election chances," Hsu added.
Source: Focus Taiwan News Channel