ADRs of TSMC, the world's largest supplier of made-to-order chips, and United Microelectronics Corp (
TSMC's ADR premium has narrowed by two-thirds since the end of April, and stood at 11 percent as of Thursday's close. Since Sept. 5, the premium paid for UMC has shrunk by more than half, to 12 percent. The TAIEX was closed Friday for the Double Ten National Day holiday.
CLSA's Sutton suggested that investors may buy shares of China Steel Corp (中鋼), Taiwan's biggest steelmaker, and sell the shares of Korea's Posco, the world's fourth-largest steel producer. China Steel is 11 percent held by overseas investors, while Posco has 65 percent foreign ownership.
Similarly, he predicted that investors may switch to Chunghwa Telecom Co (中華電信), which is 12 percent owned by overseas investors, from Korea Telecom Corp, 45 percent owned by foreign investors.
Any move toward the TAIEX would also reflect growing demand for electronics, which has helped the country's economy rebound following this year's SARS epidemic.
The government in August raised its economic growth forecast for this year to 3.1 percent from 2.9 percent. TSMC said last week that it's using more than 95 percent of its most advanced production capacity as demand rises for gear such as digital cameras.
Exports rose 12 percent last month as electronics makers shipped more components to Chinese factories. The increase took place even as the Taiwan dollar rose in value against the US dollar. For the year, the currency is up 2.9 percent.
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