Taipei--Shares in Taiwan jumped more than 1 percent on Monday, helping the weighted index remain at its highest in 27 years at a time when buying focused on large cap stocks across the board, dealers said.
Among the gaining market heavyweights, contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC, ???) was spotlighted in Monday's strong buying after the stock went ex-dividend and investors rushed to buy TSMC shares on hopes that the stock will return to the level before going ex-dividend amid optimism toward its fundamentals, dealers said.
TSMC will pay NT$7 in cash dividend per share for its 2016 earnings, the highest cash dividend payout in its history.
In addition, shares in Hon Hai Precision Industry Co. (??), an assembler of iPhones and iPads for Apple Inc., rose more than 6 percent with investors encouraged by a recent research note issued by an Asian brokerage which upgraded its target price on the stock from NT$150 to NT$200, they said.
The weighted index on the Taiwan Stock Exchange closed up 136.26 points, or 1.31 percent, at a day's high of 10,513.96, off an early low of 10,341.86, on turnover of NT$124.94 billion (US$4.12 billion). The closing level was the highest since April 4, 1990, when the index ended at 10907.09.
The market opened down 0.35 percent on follow-through selling from the earlier session as local investors took their cue from a mixed Wall Street, where the Dow Jones Industrial Average fell 0.01 percent and the tech heavy NASDAQ index rose 0.16 percent on Friday, dealers said.
However, buying emerged soon after the opening losses as investors scrambled to buy into TSMC, Hon Hai and other large cap stocks in both the electronics and non-high tech sectors, pushing up the weighted index by more than 100 points to close at a high for the day, they said.
"Today's strong showing surprised me," KGI Securities analyst Phil Chu said. "I have been amazed by so many investors willing to pick TSMC shares betting the stock will soon return to its pre ex-dividend level soon," Chu said.
Due to the share price being ex-dividend, TSMC's reference price at the opening of trading was cut by NT$7 from the previous closing level to NT$210.00. However, investors' strong interest meant that TSMC shares rose NT$5 on Monday, recovering more than two-thirds of the loss in one session.
"Last year, it took TSMC shares three trading sessions to return to their pre ex-dividend level," Chu said. "Based on its strong showing today, It's possible TSMC will recover all of the loss due to going ex-dividend in only two days."
TSMC, the most heavily weighted stock on the local market, gained 2.38 percent to finish at NT$215.00 with 58.69 million shares changing hands.
Led by TSMC, the bellwether electronics sector ended up 0.93 percent.
In addition, Hon Hai got a boost from an Asian brokerage's research note which raised its target price on the stock from NT$150 to NT$200 and left an "outperform" recommendation unchanged.
Hon Hai, the second largest stock in terms of market cap, rose 6.67 percent to close at NT$120.00, the highest since Feb. 9, 2011, when the stock also ended at NT$120.00. Chu said that Hon Hai is likely to gain further pushed up by the NT$200 target price.
In the old economy sector, shares in Formosa Plastics Corp. (??) rose 1.97 percent to close at NT$93.30, Formosa Chemicals & Fibre Corp. (???) gained 2.06 percent to end at NT$94.00, Nan Ya Plastics Corp. (??) added 3.02 percent to close at NT$75.00 and Formosa Petrochemical Corp. (???) rose 5.07 percent to end at NT$114.00.
The four heavily weighted stocks, which benefited from a rebound in international crude oil prices, fall under the corporate umbrella of Formosa Plastics Group (????).
Among the gaining large-cap financial stocks, shares in Cathay Financial Holding Co. (???) rose 2.86 percent to close at NT$50.40 and Fubon Financial Holding Co. (???) added 2.11 percent to end at NT$48.40 on bargain hunting.
"Judging the solid gains posted by these big cap stocks, I think that foreign institutional investors stood on the buy side today," Chu said.
According to the TWSE, foreign institutional investors bought a net NT$17.14 billion worth of shares on the main board on Monday.
"With the current quarter approaching an end, many institutional investors tend to raise their holdings in a bid to dress up their books and leading up to the end of this month such buying could continue," Chu said.
Source: Focus Taiwan News Channel