Taiwan stocks are likely to trend lower this week as an expected US interest rate hike later this month and China's moves to ease economic growth hang over the market. Strong corporate sales could support shares.
The benchmark TAIEX share index fell 6.7 percent to 5,724.89 last week, tumbling from a four-week closing high on Friday, May 28, as high oil prices, and rumours of Chinese military exercises and economic sanctions undermined confidence.
"I think the market feels that current share prices still don't accurately reflect the economic outlook for the second half," said Richard Lee, assistant research manager at SinoPac Securities.
"China's macroeconomic adjustments, US interest rates and high oil prices are still a factor. I think there is a chance we will break through the bottom next week," he said, referring to a nine-month low close of 5,482 reached on May 17.
Although oil prices have come off recent highs, there are still worries of higher inflation for Taiwan, which imports virtually all of its oil needs. More importantly, the island's two largest export markets, the United States and China, look set to moderate the growth of their economies.
Taiwan's military said they saw no signs of unusual activity by China's armed forces, and the rumoured sanctions turned out to be a proposal by a Chinese scholar. However, the impact of rumours on the market underlines the fragile sentiment of investors who are selling on any market talk, said analysts.
Taiwan's listed firms are required to announce May revenues by Thursday, and strong results from heavyweight companies could ease some doubts, analysts said.
BenQ Corp, Taiwan's largest maker of mobile phones and PC peripherals, saw sales double last month from a year earlier. Powerchip Semiconductor, the island's No 1 memory chip maker, said sales nearly quadrupled.
Chip makers such as Taiwan Semiconductor Manufacturing Co may also start on a high note on Monday as US technology stocks gained ground on Friday after Intel Corp tightened its revenue forecast towards the high end.
While Taiwan's technology sector had an opportunity to reflect the news from Intel on Friday, a 0.94 percent gain in the Nasdaq and a 1.61 percent advance in the Philadelphia semiconductor index could offer additional cheer.