Taipei shares outlook: Higher on central bank rate cuts, NASDAQ

TAIPEI (AFX-ASIA) - Share prices are expected to continue higher after the central bank cut interest rates in the wake of the FOMC rate decision, even though it stopped short of resorting to the more powerful instrument of cutting deposit reserve requirements, dealers said. 

Sentiment is also likely to be bolstered by further overnight gains on NASDAQ on expectations that the easing in monetary policy will fuel a recovery in the U.S. economy and corporate earnings, they said. 

At the same time, however, investors may refrain from pushing the upside too much until they hear what President Chen Shui-bian has to say in his televised address at 11:00 am, they added.

Yesterday, the weighted index closed up 61.42 points at 5,143.44 on turnover of 50.89 bln twd.

Foreign institutions were net buyers of shares worth 1.22 bln twd, local investment trusts net buyers of 26.11 mln twd while brokers were net buyers of 84.78 mln twd.

"A further rebound towards 5,500 points looks likely in the near term, with subsequent momentum determined by people's perception of the timing of a fundamental turnaround," ABN AMRO Asset Management vice president Vincent Ho said.

"While we now hear talk that the second quarter -- or even (the month of) May -- should be considered the bottom for bellwether electronics, most investors would rather wait and see if this will really be the case before making their next move."

This in turn explains why electronics majors have failed to attract much interest given their ex-dividend lead, he said. 

The central bank's rate cut, like the purchases by major government funds lately, must be part of a government campaign to support the market ahead of May 20 but this is unlikely to ignite a major upturn, he said.

The market will have to test support towards 5,000 points again next week with the May 20 lead out of the way if some unexpected fresh negative leads materialise, such as MSCI's announcement of its provisional index series being perceived as an disappointment, he added.

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