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Taiwan shares rally in morning session on Fed's stimulus move

2012/09/14 11:41:50

Taipei, Sept. 14 (CNA) Taiwan share prices moved sharply higher Friday morning as investors hailed the U.S. Federal Reserve's move to launch a third round of quantitative easing (QE3) to boost the economy, dealers said.

Buying spread across the market, led by large-cap stocks in both the high-tech and old economy sectors, sending the index above the 7,700-point mark briefly as fund inflows increased, dealers said.

As of 11:09 a.m., the weighted index had climbed 114.80 points, or 1.51 percent, to 7,693.60 on turnover of NT$77.84 billion (US$2.64 billion).

"Judging from the strong gains in the local bourse and other regional markets this morning, it seems many investors have faith in the U.S. central bank's latest stimulus measures," Hua Nan Securities analyst Stan Chang said.

Fed Chairman Ben Bernanke announced overnight that the U.S. central bank will spend US$40 billion (NT$1.18 trillion) to buy mortgage-backed securities every month for however long it deems necessary.

"Before the launch of the QE3, the Fed’s bond buying was focused on treasuries," Chang said. "Now with the addition of mortgage-backed bond purchases, it is estimated the Fed will inject as much as US$85 billion per month into the market.”

The new move showed the Fed's determination to save the economy by injecting as much liquidity as possible into the market, he said.

“The main goal is to improve the U.S. job market and cut its jobless rate," Chang said.

He noted that the global financial markets have been boosted by the optimism toward the economic fundamentals since Fed's new step.

"At home, share prices are staging a strong rally amid ample liquidity,” he said. “Many investors who bought stocks are betting that the latest liquidity easing by the U.S. will have a spillover effect on Asia and further lift asset value here."

Chang said the electronics sector attracted strong buying soon after the market opened as investors anticipate that an improving economy after the Fed's move will boost demand for high-tech devices.

Among the winning electronics stocks, Hon Hai Precision Industry, which manufactures iPhone and iPad for Apple, rose 4.41 percent to NT$97.10. Foxconn Technology Co., a casing supplier to Apple, was up 3.42 percent at NT$121.00.

The two stocks were rising on expectations that they will benefit from the debut of iPhone 5, the latest smartphone model by the U.S. consumer electronics giant.

"I expect the local bourse will challenge the 8,100-point mark in the short term on further fund inflows," Chang said. "But, before making such a leap, the market will face some technical hurdles ahead of 7,700 points."

(By Frances Huang)
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