Taiwan share prices are expected to extend gains this week on the back of ample liquidity, with the electronic sector in focus as improving investor confidence continues to support a strong market recovery which started in October, dealers said.
They said fresh problems at United Microelectronics Corp (UMC), whose chairman Robert Tsao is stepping down after another spat with the authorities, is an isolated case and unlikely to have a wider impact.
Foreign investors look set to remain on the buy-side while local institutional investors may rebuild their portfolios as they seek to keep up. In the electronics sector, liquid crystal display (LCD) manufacturers and consumer product makers, such as cell phone set and digital camera makers, are expected to attract further support.
Some of the liquidity may be directed to the dynamic random access memory (DRAM) sector, a market laggard, to narrow a valuation gap with the broader market, dealers said.
For the week to December 30, the weighted index closed up 35.71 points or 0.55 percent following a 2.55 percent rise the previous week. Average daily turnover rose to 121.55 billion Taiwan dollars (3.71 billion US) after 104.98 billion dollars. For 2005, the market was up 6.6 percent, with most of the gain coming in the last two months after the bourse badly lagged a very strong regional performance.
"More and more investors are turning upbeat on the market prospects. That's why the market remained calm after UMC's Tsao announced his resignation," said Johnny Lee, an analyst with President Securities.
While the electronic sector is expected to benefit from positive fundamentals, petrochemical stocks may draw rotational buying as international ethylene prices have showed a pick-up, the dealer added.