Investors should buy Asian computer-related shares such as Taiwan Semiconductor Manufac-turing Co (TSMC,
Taiwan "is a very cyclical market," White, head of Asia-Pacific equity strategy, said in a Bloomberg interview last week.
"Going into 2005, performance is going to be driven by the outlook for technology, and that's your global growth play."
White recommends investors hold more shares of Taiwanese companies than represented in the Morgan Stanley Capital International's Asia-Pacific ex-Japan Index. He also wrote in a Dec. 22 report that Japan's Nikkei 225 Stock Average will climb about 14 percent from its current level to 13,000 by June, driven by growth in the economy.
Taiwan was raised to "overweight" from "market weight," the first revision from Merrill since March 2003. The broker advises buying TSMC, the world's largest supplier of made-to-order chips, Taiwan Green Point Enterprises Co (台灣綠點), which makes molds, casings and other plastic parts for mobile phones, and Merry Electronics Co (美律), a microphone maker.
Merrill Lynch, the world's biggest securities firm, also recommended investors sell Hong Kong shares after the Hang Seng Index rallied 20 percent in the past six months in a report dated Dec. 22.
The TAIEX has risen 7.8 percent in US dollar terms this year, the second-worst performer in Asia after China, after Taiwan's ruling party failed to secure control in the Legislative Yuan in elections earlier this month.
"We sense that pretty much all the bad news that could be mustered has already been fully discounted," White wrote in the report.
In the first half of next year, Merrill Lynch advises investors to buy shares of suppliers of specialty components because of sales growth. The broker favors companies such as Japan's Hoya Corp, the world's largest supplier of glass plates used by semiconductor and display-panel makers, and Solomon Systech (International) Ltd, a Hong Kong-based chip designer run by former Motorola Inc executives.
Investors should then shift in the second half to display panel makers such as Sharp Corp, Japan's biggest maker of liquid-crystal display panels, and Taiwan's AU Optronics Corp (友達光電), the world's third-largest maker of flat-panel displays used in computers and televisions, on expectations that the industry will pick up in 2006.
Investors in Hong Kong should hold stocks in line with their representations in the MSCI Asia-Pacific ex-Japan Index, Merrill Lynch said.