The Wall Street Journal-20080115-Taiwan Stocks Climb on Election Results
Return to: The_Wall_Street_Journal-20080115
Taiwan Stocks Climb on Election Results
HONG KONG -- Taiwanese stocks climbed nearly 2% yesterday, and were rising again this morning, after weekend elections that saw the opposition Kuomintang party in a landslide victory.
Investors judged the win as a turning point that could lead to improved relations with China and help spur Taiwan's economy. Taipei's Weighted Price Index added 1.8%, or 144.10 points to 8173.41. In early trading Tuesday in Taipei, the index was up another 2%.
Last year, the benchmark rose 8.7%, and ranked as the second-worst performing regional market behind Japan's Nikkei Stock Average, which fell 11.1%.
Shares related to the banking, hospitality, transport and export industries led the rally on expectations the new political climate could foster trade and tourism.
Shares of Cathay Financial Holdings, Taiwan's largest financial holding company, carrier China Airlines, and property group Sinyi Realty Inc. all climbed their 7% daily limit.
"The election signals a reordering of national priorities toward growth and commercial prospects commercial prospects, and away from idealistic issues such as national identity," said Bear Stearns strategist Michael Kurtz in a research note.
Taiwanese President Chen Shui-bian stepped down as chairman of the DPP hours after the results were announced. A key pillar of Mr. Chen's administration had been Taiwan's independence from China.
Taiwan's presidential elections will be held March 22. If the Kuomintang's Ma Ying-jeou wins, it will represent the first time since the 1990s that the ruling party has also held a legislative majority.
Among technology shares, Hon Hai Precision Industry climbed 0.9% while Taiwan Semiconductor Manufacturing Co. fell 0.2%.
"Liquidity has been leaving Taiwan because there has been very few investment opportunities," said Pauline Dan, a fund manager with MFC Global Investment Management. "With the KMT in power investors in general feel that the policies will be more turning towards collaboration with China," Ms. Dan said.
Analysts cautioned the Taiwanese stock market, with its high weighting of export-dependent technology shares, could come under pressure if the global economy weakens. Almost half of Taiwan's growth during the last three quarters has been driven by the export sector.
"A slower global economy would impact on the overall earnings prospects of listed companies in Taiwan," said Standard Chartered economist Tony Phoo in Taipei, adding tech firms account for about 70% of listed companies' earnings. "It [the outlook] won't be as glittering as the kind of euphoria that you are seeing now."
Analysts also said warmer relations with Beijing were dawning at a time when Taiwan was beginning to look elsewhere as the U.S. economy slows.
"Trade-dependent Asian economies like Taiwan are increasingly reliant on demand from China," said Moody's economist Sherman Chan said in a research note yesterday.
Gainers in Taipei included transport and airline shares on expectations of closer trade and more-direct links with China.
"The DPP will attempt to rebrand itself in the future as a more moderate party, which . . . could shift Taiwan's entire political center of gravity rightward," said Bear Stearns's Mr. Kurtz.
He added the new climate could lure domestic investors back to the stock market. Taiwan's bank savings as a percentage of gross domestic product is the second-largest in Asia at 211%, after Hong Kong.
Shares in Europe
Snap Losing Streak
European markets rose after three days of declines, after a rosy outlook from International Business Machines and stronger-than- expected sales growth at SAP sparked a rally in tech stocks. SAP rose 2.7%.
The pan-European Dow Jones Stoxx 600 index rose 0.3% to 344.78, leaving it down 5.4% so far this year.
Telecom-equipment maker Ericsson firmed 3.1% in Stockholm, microchip maker Infineon Technologies gained 2.5% in Frankfurt, and technology- consulting firm Capgemini climbed 3.2% in Paris.
In LONDON, the U.K. FTSE 100 index edged up 0.2% to 6215.70. Real- estate stocks jumped, after analysts at Lehman Brothers said the sector could rebound.
In Asia, fresh concerns about a weaker U.S. economy dented regional markets.
In HONG KONG, the blue-chip Hang Seng Index fell 1.5%, or 398.88 points, to 26468.13, down 4.8% so far this year.
In MUMBAI, India's Bombay Stock Exchange's 30-share Sensex eased 0.5%, or 99.40 points, to 20728.05.
In TOKYO, markets were closed for the Coming of Age holiday.
