Taiwan stocks are expected to struggle this week as investors worry about rising oil prices and a possible interest rate rise in the United States.
Taiwan's TAIEX share index jumped 3.2 percent to 5,964.94 last week, the first advance in five weeks, as political uncertainties eased after President Chen Shui-bian began his second term by pledging to mend relations with China.
"I would view it as a technical rebound because the market had fallen too much recently," said Richard Tsai, senior vice president at Grand Cathay Securities. He pegged the index at 5,700-6,050 this week.
The index has fallen 14 percent since the year's highest close in early March, before Chen's narrow re-election victory triggered weeks of protests and a demand for a recount. The recount was finally finished last week.
While political risks have subsided, oil prices are high, markets expect a US rate hike and China is moving to cool its economy.
Chen vowed to stabilise ties with China and avoided the sensitive sovereignty issue - a red line for China, which regards the island as a breakaway province - but he did not offer anything concrete to improve relations with Beijing.
While sentiment remains weak, some investors have begun to turn their focus to companies with solid fundamentals.
On Friday, shares in memory chip maker Powerchip surged the daily seven percent limit to T$27.20 and those of AU Optronics, the world's third-largest display maker, jumped 5.6 percent to T$66.50.
Analysts said other memory chip and display manufacturers like Nanya Technology Corp, Taiwan's number two memory maker, and Chunghwa Picture Tubes, the island's third-largest display maker, are benefiting from growing computer demand and could be good bets in the longer term.
At least for last week, investors put aside worries over China's moves to cool its fast-growing economy and chased steel and cement shares, which have benefited greatly from Chinese demand.
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