Taiwan shares are expected to trade in a strict range next week ahead of the upcoming four-day New Year holiday, dealers said on Friday. With many foreign institutional investors away for their holidays, daily turnover was expected to remain low, keeping the market quiet, they said.
Mid and small cap stocks may have a better chance to turn active, while electronic and financial heavyweights are likely to remain mired in low liquidity, they added.
The market is expected to face strong technical resistance at around 4,500 points next week, while there may be a floor at around 4,300 points, dealers said. For the week to December 26, the weighted index fell 269.44 points or 5.74 percent to 4,425.08 after a 4.76 percent increase a week earlier.
Average daily turnover stood at 44.08 billion Taiwan dollars (1.34 billion US dollars), compared with 71.38 billion dollars a week ago.
Taiwan International Securities analyst Arch Shih said consolidation was a good way for the market to digest remaining selling pressure after recent heavy losses. "The pre-holiday sessions with many investors sidelined could not come at a better time to facilitate narrow fluctuations and make the market technically healthier," Shih said. Shih said small and medium-sized shipping, cement and chemical stocks may attract more market attention after they were recently hit hard. "But, such buying, if any, could not be large enough to help the market overcome resistance at around 4,500 points," Shih said.
Capital Securities analyst Chen Yu-yu said that before a quarterly earnings reporting season of US companies starts in January investors world-wide were expected to remain cautious. "The market may extend downside to 4,300 points or even lower next week amid weak sentiment towards the global economic meltdown," Chen said.