Taiwan stocks ended with solid gains on Friday as advancing US tech shares and a firming domestic currency strengthened anticipation of continued buying by foreign investors. The TAIEX share index rose 42.64 points, or 0.73 percent, to close at 5,917.16. Taking back more than half of Thursday's 1.24- percent retreat.
Tech shares like AU Optronics led the advance in trade after the tech-heavy Nasdaq composite index added 1.31 percent on Thursday to hit a seven-month high close and the Taiwan dollar firmed as much as T$0.135.
But banking shares soon overtook electronics as domestic investors favoured their stronger fundamentals and the sector's prospects for a fresh round of mergers and acquisitions as the government encourages consolidation. "Financial shares are the main focus because of merger hopes among financial holding companies. Smaller, less robust firms that could be subject to acquisition are also speculative plays," said Maggie Chine, asset management consultant at Capital Investment Management.
"US technology shares fell the day before and rebounded on Thursday and foreign funds may be heavy buyers again," she added. "This time their target seems to be TFT."
AU, the world's third largest maker of thin film transistor (TFT) displays, added 3.47 percent to close at T$38.80 in heavy trade, while its main local competitor, Chi Mie Optoelectronics added 2.47 percent.
However, banking shares knocked AU off the top of the active list by the latter half of the session. Potential take-over target Taiwan Business Bank added 3.85 percent and was the day's most heavily traded issue on volume of 200 million shares.
Bigger financial shares also advanced, with First Financial Holding Co rising 1.46 percent to T$27.80. Foreign equity funds have been pouring in ahead of Taiwan's upgrade in Morgan Stanley Capital International's global indices, which will become effective from November 30.
Overall turnover was sluggish at T$67.74 billion, though that was up from Thursday's three-month low of T$45.95 billion. The over-the-counter market's TAISDAQ index added 0.94 percent to close at 111.00, while November TAIEX futures advanced 67 points, or 1.14 percent, to close at 5,935.
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