Taiwan share prices are expected to encounter strong resistance next week as the index approaches the upper technical 4,500-4,600 point range, dealers said Friday. Despite a recent significant technical rebound, market confidence remains weak amid lingering concerns over a global economic downturn and further volatility on Wall Street, they said.
Investors have turned cautious before bellwether electronics companies release their November sales figures, starting from next week, to give a clearer indication on economic fundamentals, they added. While profit taking may continue to weigh in the market next week, a short-term technical support could be seen at around 4,100 points, dealers said.
For the week to November 28, the weighted index closed up 289.39 points or 6.94 percent at 4,460.49 after a 6.32 percent fall a week earlier. Average daily turnover stood at 53.51 billion Taiwan dollars (1.61 billion US), compared with 47.71 billion dollars a week ago.
"Before riding out the resistance range, the market has entered a consolidation mode," Capital Securities analyst Chen Yu-yu said. The market was faced with limited profit taking pressure Friday, while interest in some select electronic stocks helped offset selling.
Chen expects profit taking will continue to affect the market. "In a bear market, whenever a technical rebound lifts share prices, investors tend to pocket the gains, in particular, as the economy is deteriorating," Chen said. While Concord Securities analyst Allen Lin also expects resistance ahead, short covering in large cap electronics and financial stocks will help to stabilise market fluctuations.
He said interest in the financial sector comes from expectations of closer banking co-operation between Taiwan and China in the near future. "However, a down market cannot been easily reversed. We need more market participation to boost daily turnover," Lin said.