Taiwan share prices are expected to gain further amid active rotational buying as investors short cover their positions after recent heavy losses, dealers said. A stronger Taiwan dollar is likely to encourage foreign funds to come in, injecting more capital into the already highly liquid local bourse, lending support to share prices, they said.
Buying may focus on lagging electronic large cap stocks, such as Hon Hai Precision, which announced it is to enter the biotech industry to diversify its investments, they said.
Petrochemical heavyweights, including Formosa Plastics, Nan Ya Plastics and Formosa Chemicals & Fibre, may also benefit from adequate liquidity on their relatively low valuations, they added. However, the market is expected to face stiff technical resistance at around 4,800 points next week as investors remain on alert over global economic fears, while technical support may be seen at around 4,500 points if any profit taking erodes gains, dealers said. For the week to March 6, the weighted index rose 96.48 points or 2.12 percent to 4,653.63 after a 2.71 percent increase a week earlier.
Average daily turnover stood at 84.39 billion Taiwan dollars (2.41 billion US), compared with 62.53 billion dollars a week ago. "The expanded daily turnover demonstrated more investors were willing to return to the trading floor," Taiwan International Securities analyst Arch Shih said.
Compared with repeated plunges on Wall Street, the local bourse has appeared resilient, Shih said. "I expect bargain hunters will keep showing up to take advantage of recent overshooting. It is possible for the market to challenge 4,800 points soon," Shih said.
Concord Securities analyst Allen Lin said the technical hurdles ahead of 4,800 points are not easy to jump over unless daily turnover expands to 100 billion dollars. "But, as the index falls to 4,000-4,500 points on profit taking during the trade, it will be a good buying opportunity," Lin said.