Taiwan equity market is expected to make a strong rebound over the next two to three years with the newly-appointed leadership splashing out 4 trillion Taiwanese dollars (HK$1 trillion) to boost its infrastructure sector, said JF Asset Management Investment Manager Peter Tang.

He also said that the banking, airline and property sectors could also benefit from the closer economic link with the mainland.

"Taiwan economy has lagged behind over the past eight years," Tang said.

"In the light of the experiences of Hong Kong and Singapore, an economic rebound will generally last for two to three years, so we are pretty confident about the outlook of Taiwan since the market has just been out of recession," Tang said.

About the infrastructure, he said its weight is relatively small.

But he expected the sector would take off given the government promises to earmark 4 trillion Taiwanese dollars (HK$1 trillion) for building airport, highways and railways in next eight years.

As the Taiwanese leadership steps up cross-Strait communication with the mainland, Tang predicted more capital from Taiwan expatriates on the mainland would flow back to the province, especially for the property area.

Monthly capital inflow has leaped 24 times between April and December last year, at which the daily flow was as largest as $73 million.

He also said that the banking sector would be galvanized by the relaxation of foreign investment. More foreign lenders will come to explore the market stimulating acquisition activities.

However, the US economic slowdown will cast a shadow on the outlook of the technology sector in 2008. But, it might regain the pace next year, Tang said.

He, however, said that there are still many uncertainties ahead. "Inflation is likely to continue when the new government takes office. Oil price will rise at least 20 percent."

Taiwan Weighted Index yesterday gained 97 points to end at 9,295.

Yesterday, Hong Kong-listed Taiwanese companies had a mixed performance.

Foxconn International Holdings dipped 0.89 percent to HK$11.14. Capxon International Electronic downed 1.39 percent to HK$0.35. Tingyi Holdings rose 3.98 percent to HK$10.96.