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Taiwan stock market forecast to remain stagnant ahead of polls

2018/11/19 16:26

Taipei, Nov. 19 (CNA) Taiwan's equity market is unlikely to show significant movement this week amid political uncertainty leading up to the Nov. 24 local government elections, analysts said Monday

In addition, there are no leads from U.S. markets, which are in consolidation mode, analysts noted, forecasting that the Taiwan equity market will move in a narrow range, hovering around 9,800 points, this week.

Last week, the benchmark weighted index on the Taiwan Stock Exchange (Taiex) closed down 32.92 points or 0.33 percent at 9,797.09 points. Market capitalization fell about 0.38 percent to NT$29.47 trillion, a drop of NT$112.37 billion.

The FTSE TWSE Taiwan 50 Index, which comprises the 50 largest companies in Taiwan, dropped 69.17 points or 0.92 percent last week, while the Formosa Stock Index, which is made up of stocks listed on the main board and the over-the-counter market, lost 33.36 points, or 0.30 percent.

On Monday, stocks continued to trade in a narrow range, with the Taiex ending up 31.60 points, or 0.32 percent, at 9,828.69.

Liao Che-hung (廖哲宏), a manager at Allianz Global Investors Taiwan Technology Fund, said the local equity market was being affected by uncertainty over the Nov. 24 local government elections, in which a total of 11,047 public offices are up for grabs, including the mayoral seats in Taiwan's six major cities.

The political uncertainty will continue to affect equity price movement this week, particularly as the end of the third-quarter earnings season last week diverted attention from the economic fundamentals to political factors, Liao said.

With no strong leads from the U.S. markets at this time, the local market is likely to remain stagnant for the rest of the week, staying around 9,800 points, he forecast.

In the short term, the movement of the Taiex will depend on the strategies of foreign institutional investors, Liao said.

Within the narrow range of movement, the Taiex could get some support at around 9,700 points, he said.

Cathay Futures Consultant agreed that the Taiex will remain at the 20-day moving average of around 9,769 points in the short term.

In a research note, Cathay Futures Consultant said a stronger U.S. dollar and higher interest rates in the United States will prompt foreign investors to keep moving funds out of Asia, which will reduce liquidity in the Taiwan market and continue to affect shares.

Meanwhile, Chen Yi-hao (陳奕豪), manager of Jih Sun Upstream Fund, said the escalating trade tensions between the United States and China may hurt Taiwan, as global demand is likely to drop for tech gadgets, in particular Internet communication devices and servers.

If demand from China in particular weakens, the global tech market will suffer and investors in the Taiwan stock market will become more cautious toward the bellwether electronics sector amid their worry over sales of the latest iPhone models, he said.

Taiwanese suppliers to Apple Inc. account for about 40 percent of the total market capitalization on the local main board and over-the-counter market.

Looking at the rest of the year, Hsiao Hui-chung (蕭惠中), a manager at Allianz Global Investors Taiwan Fund, said lower international crude oil prices may affect raw material stocks on Taiwan's equity market but would boost shipping stocks.

(By Chung Jung-feng, Jiang Ming-yan and Frances Huang)Enditem/pc