Mon, Jul 12, 2004 - Page 10 News List

Stocks head for the doldrums

LANGUISHING MARKETS Investors are expected to sit out the summer heat waiting for earnings reports later this month, and activity on the nation's bourses should reflect this

By Lisa Wang  /  STAFF REPORTER

Taiwan's stock market is expected to head into the doldrums over the next few days as cautious investors await first-half earnings results, amid a raft of warnings from tech bellwethers, market watchers said yesterday.

First-half earnings from key companies, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's largest contract chipmaker, and AU Optronics Corp (友達光電), the world's No. 3 flat-display panel supplier, are scheduled to be released late this month.

But investors are worried that companies may show weaker second-half earnings, in line with their international competitors, analysts said.

"At this point, most investors will choose to stay on the sidelines before the release of the biannual financial reports for the second half of the year," said Kevin Chung (鐘國忠), an analyst with Jih Sun Securities Investment Consulting Co (日盛投顧).

Amid concerns over sharp price cuts for flat screen displays in the second half of the year, AU ended a record-high sales streak of 11 consecutive months, posting sales of NT$15.87 billion last month, down 4.7 percent from NT$16.66 billion in May.

AU is scheduled to release its first-half profits on July 22. Semiconductor bellwether TSMC is set to give its outlook for the third quarter on July 29.

In the US, chip giant Intel Corp is scheduled to release its second quarter earnings on Wednesday. But Lehman Brothers analyst Tim Luke trimmed his forecast for Intel's third-quarter profits to US$0.30 a share from US$0.31 last week citing subdued demand for personal computers.

"On the local equity market, the volume will be low for a while, before uncertainties are cleared up," Chung said. "Plus, foreign investors were inactive during the summer vacation, which is part of the reason behind the subdued trading," he added.

He forecasts the volume for the upcoming week will edge up to around NT$300 billion. The benchmark TAIEX is likely to seesaw at a narrow range between 5,400 points and 5,900 in the near term, Chung said.

In the past week, the TAIEX climbed by 2.08 percent, after adding 1.33 percent to close at 5659.78 points on Friday. The trading volume was low, totaling about NT$245 billion.

Chung suggested investors retreat from the tech sector to commodity stocks, with stable profitability and a greater presence in the growing Chinese market, such as Formosa Plastics Corp (台塑).

Bill Lan (藍新人), a portfolio manager who help oversee a NT$5 billion fund for Jih Sun Securities Investment Trust Co (日盛投信), also expects a quiet week ahead.

Lan is still betting on tech firms, expecting a significant growth in corporate hardware spending will emerge in the final quarter, which will bolster tepid demand for computers and related electronics.

"Tech shares, including flat-screen makers, chip packagers and testers, as well as chip foundries will regain some power this week. Tech stocks will still be the most active on the stock market," Lan said.

He expects the tech sector will bounce back this week, as investors gradually digest about a rash of bearish news about Intel and Amkor Technology Inc.

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