Ample liquidity could push Taiwan shares up in April
As the local market remains awash in liquidity, shares are expected to ride the wave of an uptrend after recent consolidation, market analysts said Saturday.
Wang Chung-liang, a manager of the Taishin Taiwan Small & Medium Cap Fund, is one of the upbeat analysts.
Wang said that several major central banks around the world have kept injecting funds into the market and that the spillover effects have been seen in the local market, lending sup- port to local shares.
The European Central Bank kicked off a U.S.-like quantitative easing program in early March to buy bonds worth 60 billion euros (US$64.8 billion) per month from the market.
The Bank of Japan, which has started pumping funds into the market, is expected to announce an expansion of its stimulus program later this month, while the central banks of China and South Korea have cut their key interest rates to keep liquidity high.
A worse-than-expected March non-farm payroll report in Washington may slow down the pace of the U.S. Federal Reserve's launch of an interest rate hike cycle, which could further maintain global liquidity levels.
On Thursday, the weighted index on the Taiwan Stock Exchange closed up 0.97 percent at 9,600.32 points on a technical rebound as foreign institutional investors shifted to the buy side by buying a net NT$5.27 billion (US$168 million)-worth of local shares on the main board. The local equity market was closed Friday for a public holiday.
Although foreign institutional investors registered a net sell-off in recent sessions to lock in their earlier gains ahead of Thursday's buying, they still kept moving funds to Taiwan from overseas due to high liquidity levels in the global market, analysts said.
Wang said that investors have been advised to take advantage of the current ample liquidity by buying into stocks in certain sectors that have greater growth potential. Among the sectors Wang favors were Internet- related stocks, which could benefit from China's efforts in developing the 4G LTE network nationwide, while the analyst also recommended flat panel component suppliers that are expected to see rising demand due to strong sales in ultra-high-definition displays.
Wang said that integrated circuit design stocks could witness demand growing in the China market, and memory chip makers are expected to see orders streaming in as their buyers rebuild inventories after the Lunar New Year holiday in February.