Wider flux range opens to­day amid high hopes

His­toric mar­ket re­form might af­fect around 9.4 mil. in­vestors

The China Post - - FRONT PAGE - BY JOHN LIU

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.

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