The TAIEX could climb to 12,000 points or even higher this year, according to foreign investment house Morgan Stanley Dean Witter (MSDW).
The fundamentals of Taiwan stocks have turned positive, according to a recent research report on Taiwan stocks by MSDW, and bullish factors include the rapidly increasing profitability of listed companies and ample liquidity in the market.
The investment house sees the TAIEX climbing by between 20 percent and 25 percent from its present level, for a target of between 12,000 and 12,500 points.
In addition, MSDW has also raised the average growth rate of earnings for listed companies to 42 percent from a previous estimate of 32 percent. Reasons for the hike include the fast growth of Taiwan's high technology industry, rapidly rising domestic demand and the positive effect of corporate restructuring.
MSDW sees average earnings growth at 25 percent for next year, which is unchanged from its prior estimate.
Several other international securities groups have also issued similar predictions for the TAIEX recently.
ABN-AMRO in Hong Kong earlier predicted the nation's main index could top 10,500 points this year, but then revised its expectations to 12,600. ABN-AMRO cited Taiwan's strong export growth and favorable interest rate and inflation environment for the change.
Credit Lyonnais in Hong Kong anticipates the TAIEX will hit the 11,595-point mark. The investment house expects average earnings growth will come in at 55 percent this year, led by a third year of expansion in the semiconductor industry.
Jardine Fleming in Hong Kong expects the TAIEX will reach 11,000 by year-end, but a company analyst said the prediction was likely a conservative one, and that the milestone was likely to be reached by the middle of the year.
While a number of foreign investment houses have been releasing reports on their positive expectations for Taiwan stocks, many advisors are reluctant to provide any comment on the TAIEX's prospects or even the outlook for individual stocks.
This is especially so after the incident involving Peter Kurz, director of Merrill Lynch Taiwan Ltd, who has been asked to meet with officials from the Securities and Futures Commission (SFC, 證券會).
Kurz recently made some comments about Taiwan stocks and price performance in local media reports, which SFC officials say they want to "understand better."
SFC chairman Lin Tzong-yeong (林宗勇) was quoted by local media yesterday as saying it was inappropriate for foreign investment houses to comment on the stock market or recommend any particular stocks when they are interviewed by the media. Lin said that type of information should only be given to clients and not the public.
But analysts with foreign investment houses bristled at the idea.
"It's ridiculous that while professional investment advisors cannot give any comment on the stock market, many amateur government officials have been giving all kinds of predictions on the market's outlook," said a senior executive of a foreign securities house, who declined to be identified.
The executive cited as the worst example the case of Lien Fang-yeu (
In addition, officials at the Central Bank of China (
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