Taiwan stocks rebound ahead of local elections

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Taiwan stocks rebound ahead of local elections

Expectations of slower global interest rate increases have led to the benchmark gauge being plunged back into the Taiwanese market, as foreign investors are quietly piling back into the Taiwanese market.

The stock rebound and influx of foreign capital come ahead of local elections on Saturday, with polls serving as a show of confidence in the Democratic Progressive Party ahead of a presidential vote in 2024.

The November net inflow into the island's stocks reached $5.73 billion as of Thursday, which is the first positive figure in six months and the most since June 2007 according to Bloomberg-compiled data.

More market watchers are calling for an end to the semiconductor downcycle by mid- 2023, due to enticing valuations. The rebound in Taiwanese stocks has been helped by a potential pivot by the Federal Reserve and easing geopolitical tensions after the meeting between China's President Xi Jinping and his US counterpart Joe Biden.

The Taiex Index is up 14% this month, set for its best in more than 13 years, with the index heavyweight Taiwan Semiconductor Manufacturing Co. advancing 27%. The Taiwanese dollar has gone from its weakest level since 2016 with the currency moving more than 4% in November to go for its strongest monthly gains since 1998, as a result of the shifting sentiment.

Angela Chuang, a fund manager at Capital Investment Trust Corp, said Taiwan's stocks are primed to advance further once the election overhang is removed. Past records show that the Taiex rose by 10% on average one month after local elections. The Taiex Index is still down 19% this year, with net selling of $41.9 billion worth of stocks by foreigners set to be the most on record.

In the traditionally strong month of December, the outlook is more positive as companies are buying back shares to boost their portfolios for year-end window-dressing, said Ares Chou, a fund manager at Franklin Templeton SinoAm Securities Investment Management Inc.

With help from Jeffrey Hernandez and Chester Yung.

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