Taiwan Stocks Poised for Bull Market as Chip Shares Extend Gains

Catherine Ngai and Ishika Mookerjee, Bloomberg News

The Taipei 101 building and other buildings are illuminated at dusk in Taipei, Taiwan, on Tuesday, Jan. 26, 2021. Taiwan is scheduled to release gross domestic product (GDP) figures on Jan. 29. Photographer: I-Hwa Cheng/Bloomberg , Bloomberg

(Bloomberg) -- Taiwan’s benchmark stock gauge entered a bull market as trading resumed after the Lunar New Year holidays, with a broad rebound in chip shares boosting foreign buying in the market. The Taiwan dollar also strengthened.

The benchmark Taiex index rose 3.8% Monday, its best day since May 2021. That took gains from an October low to 22%. Taiwan Semiconductor Manufacturing Co. and MediaTek Inc. contributed the most to the index’s advance with a more than 6% jump each.

Speculation that the Federal Reserve is nearing the end of its aggressive interest rate hike cycle along with broad optimism in the region due to China’s reopening have spurred a comeback for the tech-heavy market after stocks slid for most of 2022. Taiwan’s stock gauge fell 22% last year.

Big investors including Warren Buffett are also betting that the worst is over for chipmakers amid attractive valuations and easing tensions between China and the US. Foreign funds have snapped up $7.1 billion in shares year-to-date, according to Bloomberg-compiled data. Their net purchase of $2.5 billion on Monday is the largest daily inflow since 2005.

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Goldman Sachs Group Inc. upgraded Taiwan to market-weight from underweight late Friday, citing positive trade exposure to China’s reopening, a strong tech cycle recovery in the second half, and reduced near-term geopolitical risks as among tailwinds for the market.

Meanwhile, the Taiwan dollar advanced to the strongest level since August, rising as much as 0.8% to 30.14 versus the greenback.

“TWD is playing catch-up to gains in regional fx as markets reopened from week-long holidays. Sentiments remain conducive with the Taiex, Philadelphia Semiconductor Index extending gains while China reopening story supports growth hopes,” said Christopher Wong, foreign exchange strategist at Oversea-Chinese Banking Corp in Singapore.

--With assistance from Chester Yung and Jeanny Yu.

(Updates with foreign investors’ net purchase data in the fourth paragraph.)