* Foreign fund inflows to continue on China hopes
* Foreign equity buying at near 2-yr high in April
* Taiwan stocks No. 3 world performer in 2009
For more stories on Asia fund inflows [ID:nTP126890]
By Gina Chang
TAIPEI, May 4 A recent surge of foreign funds
into Taiwan could keep flowing in the coming months as
investors snap up local stocks in the belief the market will
outperform global peers with its growing ties to China's
Taiwan's benchmark TAIEX .TWII has risen nearly 40
percent so far this year, making it the world's best-performing
market open to foreign investors. The only better performers,
both in China, are closed to most overseas investment.
"Warmer ties with China and fewer political risks all added
to the market's attraction to foreign investors," said Andrew
Deng, a vice president of Taiwan International Securities Corp.
The expected signing of a financial services agreement with
China has been boosting local financial shares, which have
gained about 43 percent since the beginning of March, compared
with a 39 percent rise in the broader market.
China's stimulus spending, aimed at boosting electronics
and car sales, has also helped fuel recent rises in technology
and auto shares, with investors expecting China to launch
similar packages to keep its economic growth at 8 percent this
However, analysts cautioned the strong foreign fund flows
to Taiwan could slow or even reverse over the longer term if
the global economy did not improve in the second half of the
year or if cross-Strait ties sour.
"Better ties with China is a growing trend as it helps
local markets to normalise. But all the improvement could come
to a halt if Taiwan and China's relations worsen again," said
Robert Hsieh, a vice president of Shin Kong Investment Trust.
FOREIGN BUYING AT 2-YEAR PEAK
In April, foreign institutional investors bought T$103.7
billion ($3.1 billion) worth of local shares, their largest net
monthly purchase since June 2007, when the net buying was at
On a broader basis, foreign fund net inflows reached $1.9
billion in March, a level not seen since March 2008. And, on
April 30, foreign investors bought a net T$32.99 billion worth
of Taiwan stocks, the fifth-biggest daily foreign buying on
record, after local stocks logged their biggest single-day gain
in more than 18 years. [ID:nTPU001340]
The foreign buying binge of Taiwan stocks over the past
four weeks was the second-biggest among major Asian countries,
after only South Korea's $2.5 billion and accounting for nearly
a third of foreign fund purchases over the same period in Asia,
excluding Japan, Nomura statistics showed.
The huge inflows marked a sharp turnaround that saw foreign
money leaving Taiwan since last July as the global financial
TECH, FINANCIALS FAVOURED
"Warming cross-Strait ties will bring structural
improvements to Taiwan's economy, especially the financial and
domestic consumption sectors," said Wendy Kuo, chief investment
officer of Yuanta Funds, whose fund size was the fourth-largest
in Taiwan, according to the latest data.
Fidelity International held a similar view, and planned to
raise up to T$6 billion for investment in Taiwan for a Greater
China fund, said associate director Ann Chang.
"The positive effect from China will help Taiwan stocks
sustain their strong momentum," she said.
Foreign investors have been actively buying local
technology bellwethers, such as TSMC (2330.TW) (TSM.N) and AU
(2409.TW), and major financial firms including Cathay Financial
(2882.TW) and Chinatrust Financial (2891.TW) in recent months.
Analysts said technology shares and financial issues, the
top weighted sub-indexes on TAIEX, will continue to be the most
favourable sectors for overseas investors in coming months.
(Additional reporting by Faith Hung; Editing by Jean Yoon)