Taipei shares outlook: Higher on Wall St gains, central bank rate cuts

TAIPEI (AFX-ASIA) - Share prices are expected to open higher on the back of Wall Street's strength overnight and the central bank's decision to cut both the discount rate and accommodations rate by 0.125 percentage points from today, dealers said. They said the two factors will further boost sentiment, coming on the heels of Premier Chang Chun-hsiung's announcement of a minor cabinet reshuffle yesterday. Yesterday, the weighted index closed up 110.20 points at 5,609.74 on turnover of 62.60 bln twd. Foreign institutions were net sellers of shares worth 40.25 mln twd, local investment trusts were net buyers of 503.99 mln and brokers net were sellers of 26.63 mln. Jih Sun Securities Investment Consulting Co Ltd manager Cooper Leow said NASDAQ's overnight strength should persuade local investors to buy. "Semiconductor stocks here will take note of the strong showing of their U.S. counterparts, DRAM makers in particular will be heartened by Micron's gains." He said PC makers may also benefit from an inventory correction viewed as nearing an end. The central bank's rate cuts is also expected to inject momentum into the financial sector, particularly bills finance firms. "The rate cuts will increase financial institutions' interest spread ... such a move is a gesture of the government's commitment to improve the economy." The impact of the rate cuts, however, may be short-lived given the absence of any adjustment in the reserve requirements. As to whether interest in the financial sector will be sustained is subject to any further easing by the central bank through the balance of the month. "There is a possibility that the central bank will further ease monetary policy as the U.S. Federal Reserve is widely believed to be due to cut rates this month."

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