Taiwan stocks jumped 5.64 percent on Monday in active trade to a 7-1/2-month closing high, with financial shares including Cathay Financial leading gains on hopes of an influx of Chinese investments. The main TAIEX share index ended 337.83 points higher at 6,330.40, closing above 6,000 points for the first time in more than seven months and extending its best one-day percentage gain in more than 18 years on Thursday.
The market was closed on Friday for the Labour Day holiday. The market has now risen nearly 13 percent over the last two sessions, and the finish was its highest since September 10, 2008. Turnover rose to a two-week high of T$164.6 billion ($4.9 billion), up from Thursday's T$136.9 billion.
Taiwan's financial regulator said late on Thursday it would allow Chinese institutional investors to invest in its money market and convertible bonds before an expected wide-reaching financial deal is signed between the two sides. But China's qualified domestic institutional investors (QDII) will not be able to buy Taiwan stocks before the deal is signed.
The financial sub-index, the top winner of all sub-indexes, surged 6.86 percent as financial firms will likely become major beneficiaries when Chinese investments are allowed to the island. Shares of Cathay Financial, Taiwan's top listed financial holding firm, were 7 percent limit-up. Chinatrust Financial, the island's biggest credit card issuer, also ended 6.93 percent limit-up.
"Foreign investors are actively buying heavy-weights after news that Chinese investors will soon be allowed in Taiwan. It shows further signs that political risks between Taiwan and China are decreasing," said Robert Hsieh, a vice president at Shin Kong Investment Trust.
Overseas investors bought a net T$32.99 billion worth of local shares on Thursday, the fifth-biggest daily foreign buying on record. In April, they loaded a net T$104 billion into Taiwan stocks, their largest monthly purchasing in nearly two years.
"There are expectations that financial firms will benefit the most from more future co-operation between Taiwanese and Chinese companies after Far Eastone's deal," said Hsieh, who expected the market to test as high as 6,450 points in the near term. Last week, Far Eastone, Taiwan's No 3 telecom operator, said it would sell a 12 percent stake to China Mobile, boosting its shares to a four-month high on Thursday. Far Eastone shares jumped 5.31 percent on Monday.
Taiwan will open 11 public infrastructure spending projects to Chinese companies when it announces the first areas open to such investments later this month, a local newspaper reported on Monday. Sentiment was further boosted after a local newspaper said Morgan Stanley estimated Taiwan investors have some $240 billion in funds parked overseas that they could bring back home to invest as the local market heats up.
TSMC, the world's largest contract chip maker, closed limit-up after predicting strong growth in second-quarter sales and margins as tech demand gathers speed. Its shares were also lifted as Japan's Fujitsu Ltd said it would outsource semiconductor production to the Taiwan firm.
HTC, the world's fourth-largest smartphone brand, rose 6.92 percent to its daily limit after saying it expects second-quarter revenue to grow by around high single-digit percentages compared with a year earlier. Innolux, subsidiary of Hon Hai, went limit-up after a newspaper said the firm has received orders to make 15.6 inch notebook PCs for Dell, as Hon Hai moves into the portable computer space.
Shares of Hon Hai, Taiwan's No 1 electronics parts maker, were up 6.69 percent to their daily limit. AU Optronics Corp, Taiwan's No 1 LCD maker, gained 6.86 percent to its daily limit after a source said the firm was close to reaching an agreement with Slovakia on building a factory for LCD panels in the European Union country. Powerchip, the island's top DRAM maker, rose 6.92 percent after its first-quarter loss narrowed from a year ago.
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