Wider flux range opens today amid high hopes
Historic market reform might affect around 9.4 mil. investors
The stock market’s daily fluctuation cap will be raised to 10 percent today, which investors said will boost trade volume while pushing the stock index close to the 10,000-point mark.
For the first time in Taiwan’s history, the Financial Supervisory Commission (FSC) has lifted the fluctuation limit from 7 to 10 percent, and the number of stocks available for day trading will also increase from 250 to 435. These measures constitute the biggest security market reform for Taiwan in 26 years. Up to 9.4 million investors are expected to be affected.
Most professional investors are positive about the development. When South Korea raised the securities fluctuation limit from 12 to 15 percent in 1998, average trading shot from 2.41 billion to 4.75 billion won per month.
A similar scenario happened in Thailand, where the fluctuation cap expanded from 10 percent to 30 percent in 1997, resulting in average trading jump from 1.08 billion to 4.75 billion baht per month.
Chen Yi-kuang ( ), CEO of First Capital Management (
), said that with the government introducing pro-business policies, money flowing out from the sagging Chinese stock market and companies set to present profitability, Taiwan stocks will have better performance in June compared with May.
As foreign investors’ margin debt value reached a record high NT$220 million, Chen believes Taiwan’s stock index will soar to 9,800 or 9,900 points.
Pick Stocks with Good Fundamentals: Institutional
William Dong ( ), the equities and research head at UBS Securities ( ), believes relaxing the cap will benefit small and medium companies more, since stocks of large companies are not as likely to have a 10-percent price fluctuation in a day.
With the eurozone launching quantitative easing, good yield generated by Taiwan stocks, the New Taiwan dollar’s stable exchange rates, and peak season for the electronics sector in the latter half of the year, Dong is upbeat that the Taiwan stock index will reclaim the 10,000 mark.
UBS Securities has set the target mark for the Taiwan stock index at 10,600 points, and recommended buys for Taiwan Semiconductor Manufacutring Co. ( ), Advanced Semiconductor Engineering Inc. ( ), MediaTek Inc. ( ), Cathay Financial Holdings ( ), Far EasTone Telecommunications Co. ( ) and Catcher Technology ( ), among others.
Liu Kun-hsi ( ), general manager of Masterlink Securities Investment Advisory Corp. (
), cautioned that a higher fluctuation can also translate into higher risks. Therefore, investors are advised to pick out stocks with good fundamentals. Other stocks will be prone to more volatile change in prices, Liu said.