When the stock market on Taiwan began climbing last October, the experts all predicted that, as in the past, investors would soon start selling off shares and prices would drop. Instead, the market has kept right on climbing, confounding the experts and their predictions. Why?

According to a researcher at the ROC Institute of Securities Market Development, a possible reason for the "strange phenomenon" is the appearance on the market of a "new breed" of investor.

The researcher points out that the rise or fall of a stock's price should, in theory, be determined by the company's business performance. If the company's profits are good, then its dividends will exceed the general interest rate and people will want to buy its stock, raising the stock's price. Likewise, if its performance is poor, the price of its stock will fall.

However, in the past, except for a few "major accounts" and institutional investors, most market players were housewives or retirees lacking financial expertise who engaged in short-term speculation relying on word of mouth rather than long-term investment based on a company's performance.

As a result, they were easily manipulated by the large investors, who needed only to buy large quantities of a stock to induce them to blindly follow along. Then, when the stock's price had been raised high enough, the big investors would sell out and the price would drop. Investors who were slow to react would wind up buying high and selling low.

What has upset the old hands who are expert at this game is that the newcomers haven't been playing by the rules.

Just what is the new group like? Although no complete studies have been reported to date, various clues can give us an indication.

A recent survey funded by the Institute of Securities Market Development shows that 40 percent of the new investors who entered the market between March and August last year were between 31 and 40 years of age, younger than the average investor. At the same time, the proportion of housewives and retirees declined and that of entrepreneurs, professionals, government workers, and students increased.

"Young, well-educated, energetic, and willing to put in the time to study and learn about the market," is the way one researcher at the institute has described the "new breed." He believes that the group is more inclined to rationally analyze the economy and a company's strength and not so easily manipulated by the big investors.

The new group looks on investment as a science and is relatively cautious in its approach. Many of them say that they are not investing all their savings in the market but are only trying to "put some eggs in a different basket." Most are seeking to invest in well-run companies with long-term growth potential, an attitude which is seen as a healthy development.

To correctly judge a stock's worth, what the new investors urgently require is knowledge and information. In response, the Institute of Securities Market Development has set up an investors' hotline and an investment seminar course, which have been very warmly received. The first day of its operation, the hotline answered over 1,000 calls.

The response for the seminar, which offers four levels of classes, each twelve hours long, has been even more enthusiastic. Four thousand students registered for the first series of classes, and 5,000 for the next. Because classes are full, a one-to two-month wait is now required to get in.

In addition, the research departments recently set up by stock brokerages and the broad coverage of stock analyses by magazines and newspapers are also due to the new wave of investment.

Besides the "new breed" of investors, there have been some "improved breeds" as well. These are people who played the stock market before but got burned and gave up, until they saw the market take off last fall. This time around, they've learned better.

One housewife in her thirties or forties says that when she invested before she knew very little about it and spent all her time scrambling around following others, losing in the process both her money and her peace of mind. This time she is determined to acquire some systematic knowledge first. The other way is "bad for the heart," she says.

Because the reactions of small investors are different than they were before, the large investors who engaged in speculative manipulation can no longer be sure that the small investors will blindly follow along and have had to change their approach.