Taiwan stocks seen lower on pre-election caution

Taiwan's stock market, Asia's best performing so far this year, is expected to fall this week on profit taking and caution ahead of a presidential election.
With two weeks to go to the March 20 polls, analysts saw limited downside for Taiwan's TAIEX index, which hit 41-month highs last week on growing optimism over the global economy and corporate earnings.
"It's about time for the market to take a rest after the recent rally because investors would take a wait-and-see attitude before the election," said Albert Lin, vice president at Hotung Securities.
"But some companies have reported good February sales, reflecting improving global demand. We don't have to be too pessimistic on the market," Lin said.
The main index, which jumped three percent last week to 6,943.68, could see initial support at 6,800 this week, Lin said. But he said chances were slim that turnover would expand significantly after spiking to a near four-year high on Friday.
Short-term investors took profit on Changhwa Bank on Friday but analysts said the stock could regain momentum on hopes of state fund buying before the election.
Investors could also take advantage of market dips to buy computer display screen maker AU Optronics on rising demand and better earnings prospects.
However, memory chip stocks such as Nanya Tech were expected to lose ground after chip giant Intel lowered the midpoint of its first-quarter sales forecast last week.
The index has risen 18 percent since the beginning of the year, helped by heavy foreign buying, making it one of the best performers in the world.
"Foreign investors wouldn't pour so much money into Taiwan if they had doubts about the island's fundamentals," said Daniel Tseng, manager of institutional business at Fubon Securities.
"Perhaps sentiment will turn cautious before the election, but the market will regain momentum and go higher in the longer term," he said.
Foreign investors bought a net T$16.03 billion ($480 million) in Taiwan stocks on Friday, and have accumulated a net T$76.4 billion of shares over the past eight sessions.
Last month, Taiwan raised its 2004 economic growth forecast to 4.7 percent from an earlier estimate of 4.1 percent on rising domestic consumption, and analysts say the government may announce more market-friendly measures ahead of the balloting.