Taiwan's stocks could rebound this week as investors look to third-quarter earnings from major technology firms to reverse a fall through the 6,000 point mark by the main TAIEX index.
The TAIEX fell 4.6 percent last week, losing ground in every session to crash through psychological support at 6,000 to end Friday at 5,820.82, it's lowest close in more than two weeks.
The heaviest losses came on Thursday, when a sharp drop in global metals markets prompted local fund managers to sell shares exposed to steel and other raw material sectors.
These had been seen as a safe haven from the sluggish tech sector in recent months.
But electronics stocks have a chance to redeem themselves this week when memory chip makers Powerchip Semiconductor Corp and Nanya Technology Corp report results for the July-September quarter.
"They had a good third quarter, of course, and fourth quarter shouldn't be too bad either," Barits International Securities vice president Alex Huang said of the two makers of dynamic random access memory (DRAM) chips.
"So if they can't lead an advance, it means the market has some real problems," Huang said. "We would have to seriously consider if the uptrend is officially over," he added, referring to the TAIEX's rebound from lows around 5,300 in August.
Powerchip, Taiwan's largest memory chip maker, is expected to post a record profit on Monday, defying sluggish personal computer demand thanks to aggressive expansion.
Nanya, Powerchip's biggest local competitor, is forecast to show a T$2.7 billion net profit, reversing a year-ago loss of T$169 million, according to analysts polled by Reuters.
Chart watchers said the electronics sector was ripe for a rebound.
Primasia Securities technical analyst Ulrich Krach noted the 14-day relative strength index (RSI) for the TAIEX electronics sub-index was at 36, looming close to the 30-point oversold mark.
"Now that you've seen volumes come out of traditionals (traditional industries) it's got to go somewhere," he said. "You're going to see a lot of sector rotation into electronics."
The market's techs may be supported by a 0.45 percent gain in the Nasdaq on Wall Street on Friday, with the Philidelphia Semiconductor Index up 0.2 percent, although both were still down for the week.
Direction may also flow from US tech earnings. Microsoft Corp and International Business Machines Corp are among a slew of US firms reporting earnings this week.
By contrast, the RSI for traditional industry heavyweight China Steel Corp was at a lofty 85 before Thursday's correction, tumbling to reach 47 on Friday. Its shares fell 2.2 percent for the week.
The shares, which had become a major part of Taiwan fund managers' portfolios, are still up more than 30 percent from a mid-May trough on higher prices for steel and other raw materials.
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