Taiwan share prices are expected to stage a technical rebound this week but strength may be capped on continued concerns over inflation and possible interest rate hikes, dealers said.
Since foreign investors remain on the sell side, electronic heavyweights are unlikely to make a significant comeback and push the index higher, they said.
The local bourse is expected to move between 6,800 points and 6,950 points this week and dealers added As the market is approaching the psychological level of 7,000 points on a technical rebound, selling pressure may follow.
For the week to May 26, the weighted index closed down 194.64 points or 2.75 percent at 6,879.51 after a decline of 2.81 percent a week earlier.
The average daily turnover stood at 117.87 billion Taiwan dollars (3.67 billion US), following an average of 115.85 billion dollars.
"Don't expect the market to have a meaningful rebound anytime soon as worries about higher interest rates remain in place," ABN Amro Asset Management analyst Hank Chen said.
"It is still too early to pick any stocks and hunt bargains if you are empty handed. Despite heavy losses in the recent weeks, further downside is expected after the rebound," Chen said.
A sell-off in equities began on May 10, when the US Federal Reserve raised its benchmark rate and left open the possibility of further rate hikes, unnerving investors who believed the current US interest rate hike cycle was nearing its end. Federal Reserve chairman Ben Bernanke has since admitted he was guilty of a "lapse of judgement" for agonising over comments on interest rate policy.
However, the prospect of further interest hikes persist, with any move by the Fed likely to be followed by Asian central banks in order to maintain parity with the US.
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