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Local bourse rallies as tax uncertainty lifts

2012/04/13 15:33:39

Taipei, April 13 (CNA) The local bourse rallied Friday as uncertainty over a capital gains tax lifted with the Ministry of Finance’s (MOF) proposal to levy a 20 percent tax on retail investors who make more than NT$3 million in annual stock gains, dealers said.

Buying in local shares was also boosted by a rally on Wall Street overnight as concerns over the debt problems in the eurozone eased to some extent on a decline in bond yields in Spain and Italy, dealers said.

Green energy stocks such as light emitting diodes (LED) and solar energy product makers in particular attracted strong interest on hopes that consumption of energy efficient items will increase after the government announced a hike in electricity rates Thursday, dealers said.

The weighted index closed up 125.35 points or 1.63 percent at the day's high of 7,788.27, off an early low of 7,733.18. Turnover during the session totaled NT$86.75 billion (US$2.94 billion).

The market opened up 0.96 percent in a knee-jerk reaction to the capital gains tax proposal as market uncertainty lifted, dealers said. The local bourse had been under pressure in recent trading sessions because of uncertainty over the tax.

The upward momentum was maintained until the end of the session as investors took cues from the Wall Street's gains overnight amid easing worries over the debt crisis in Europe, dealers said.

Sentiment at home and abroad was also boosted by better-than-expected first quarter earnings reported by aluminum firm Alcoa, according to dealers.

"Uncertainty is the last thing the market wants," Grand Cathay Securities analyst Mars Hsu said. "The MOF's proposal ended the wild market guesses in recent trading sessions."

In addition to the 20 percent tax to be imposed on local retail investors, a 12 percent tax will also be levied on domestic institutional investors who earn in excess of NT$500,000. Foreign institutional investors will be exempt from the capital gains tax.

The proposal is pending approval by the Cabinet and Legislature.

Among the winning stocks, Cathay Real Estate rose by the daily maximum of 7 percent to NT14.25, textile firm Far Eastern New Century gained 2.90 percent to close at NT$33.70, and smartphone maker HTC ended up 2.31 percent at NT$532.00.

However, Hsu said, the local bourse is expected to encounter stiff technical resistance as it moves closer to the 7,850- to 7,900-point range.

"Turnover remained thin today despite the significant gains in share prices, indicating that many investors are still cautious about the upcoming first quarter earnings reports," Hsu said.

"With the lifting of the tax uncertainty, investors have shifted their attention to corporate fundamentals," he said.

At the end of the session, the construction sector scored the highest gains among the market’s eight largest sectors, finishing up 4.6 percent. Textiles rose 2.1 percent, paper and pulp stocks added 2.0 percent, machinery and electronics gained 1.9 percent, and the foodstuff sector closed up 1.8 percent.

Plastics and chemicals rose 1.4 percent, cement stocks added 1.3 percent, and the financial sector closed up 1.2 percent.

In the LED sector, Epistar rose 7 percent to close at NT80.20 and Everlight also finished 7 percent higher at NT$65.50.

(By Frances Huang)
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