Taiwan's stock investors will mostly seek profit opportunities in dividend and yield-driven equities this year, in an environment where stock growth is limited, a capital-market analyst at Morgan Stanley said yesterday.
"The scene for the entire year is dividend yield ? since investors may not get capital appreciation," Crawford Jamieson, a managing director of Morgan Stanley's global capital markets in the Asia-Pacific region, told the press yesterday.
With weak US dollar hurting the nation's exporters, the focus of investor interest has since last quarter turned to "domestic currency earners," Jamieson said.
The "domestic currency earners" who make profits in NT dollars include banks, telecom players, real-estate companies and those who rely on domestic consumption. Jamieson described these as defensive sectors where healthy yields are guaranteed.
Under such circumstances, the analyst said he believes now is probably a good time for the government to accelerate its privatization of state-owned companies, such as Chunghwa Telecom Co (
The TAIEX yesterday fell 6.25 points, or 0.1 percent, to close at 5,982.12 points. But Jamieson is optimistic toward the TAIEX, citing the the so-called "January effect."
He predicted the index may enjoy a liquidity-driven rally in the first quarter, which could push the benchmark index to 6,500 points before Chinese Lunar New Year.
One outperformer should be the construction sector, which has seen stock prices grow over 30 percent in the past 10 years, he added.
Jamieson said the timing of the tech sector's recovery is still unclear and varies by segment. The semiconductor sector, for example, may not fall further. Instead the sector will at best start to rebound late this year and activities will pick up in early 2006, he said.
As for the LCD sector, Jamieson maintained that it is still too early to make a prediction. But he said consumer demand for LCD TVs this year may not absorb all the new output from advanced sixth and seventh-generation factories.
However, he cast a bearish view toward downstream industries. Margins for original design manufacturers, for example, will continue to face compression, he said.
Morgan Stanley predicts the US dollar will decline by another 10 to 15 percent this year, which Jamieson said is not good for Taiwan's technology exporters.
In the US equity market, Jamieson said similar "volatile moments" will be foreseeable following the US dollar's decline and expected aggressive interest-rate hikes -- rising from the current 2.25 percent to an estimated 3.5 percent.