The benchmark TAIEX could surge to break through the 7,000-point mark in the second half of next year, after the economy starts to bottom out in the second quarter of next year, equity researchers said yesterday.
"We expect to see a rebound in the stock market in the second half of next year, after the nation's slowing economy hits bottom in the second quarter," said Terry Wang (
Another surge in momentum is coming from constant foreign capital inflows, Wang said.
Foreign investors have bought a net of over NT$200 billion of stocks so far this year and are expected to pour another NT$240 billion of funds into the local bourse after Morgan Stanley Capital International Inc (MSCI) completes its second-stage reweighting in May next year, according to Capital Investment's assessment.
Currently, Taiwanese companies have about 75 percent of their market value represented in MSCI indexes, up from 55 percent after MSCI's first re-weighting on Nov. 30. The ratio is expected to be lifted to 100 percent on May 31.
Capital Investment predicts GDP growth will peak next year at 4.60 percent in the first quarter and drop to 3.24 percent in the second before returning to over 4 percent in the third and fourth quarters.
On interest rates, Cindy Lin (
Lin said the New Taiwan dollar will continue to appreciate against the US dollar, though on a smaller scale, trading between NT$32 and NT$33 next year.
The NT dollar yesterday rose NT$0.006 to close at NT$32.444 against the greenback. The currency has risen about 4.45 percent since the beginning of the year, according to Capital Investment. Lin said the local unit may surge to NT$30 versus the US dollar next year, without elaborating.
Given an expected rosy outlook for the second half of next year, Capital Investment suggested investors enter the stock market at its low in the second quarter by investing in financial and electronics stocks.
Insurance companies that can benefit from interest rate rises as well as financial institutions that could be merger targets would be good picks, said Martin Tung (
Among electronics stocks, companies making key components for thin-film-transistor (TFT) panels, such as those that drive integrated circuits (ICs), can be included in portfolios, in view of an expected take-off in flat-panel televisions in 2006, he said.
Manufacturers of key components for mobile handsets, like flexible printed circuit boards and cases, are ideal investment targets, Tung said.
TFT-related component makers include Novatek Microelectronics Corp (
Novatek yesterday closed up 1.04 percent at NT$97.50 on the local bourse, while Optimax slid 0.66 percent to close at NT$75.00. Taiwan Green Point remained unchanged at NT$93.50 yesterday.