Buy bluechip electronics shares now, strategists say

Polaris Financial Group (寶來金融集團), one of the nation's leading investment consulting companies, yesterday suggested that investors buy bluechip electronics shares in the current quarter, when prices are expected to hit the bottom ahead of an upturn in the industry.

"We believe Taiwan's stock market will trend down in the first quarter, but it represents a good opportunity for investors to buy stocks at lower prices," said Cheng Yu-cheng (程裕城), a strategist with Polaris Research Institute (寶華綜合經濟研究院), a unit of Polaris Financial Group.

Polaris Research expects the TAIEX to hit its lowest level in March at around 5,400 points, as Taiwan's economy may lose steam in the first quarter as a result of a weakening global economy and insufficient liquidity.

After that, the TAIEX may regain momentum to rise to 6,950 points by the end of the year, Cheng predicted.

Polaris listed several chipmakers as possible investment opportunities, as the semiconductor industry is expected to hit the bottom of the curve in the second quarter owing to excessive inventory problems.

Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電), the world's biggest made-to-order chipmaker, was one of the top picks, he said.

TSMC shares have fallen 5.4 percent to NT$48.2 yesterday on the Taiwan Stock Exchange since the beginning of the year.

"In other words, investors should bet their money now on companies with good prospects in the second half," Cheng said.

Makers of liquid-crystal display (LCD) panels also offer good investment prospects, as the sector may experience its worst period in the second quarter before recovering in the second half, said Molly Lin (林美如), an analyst with Polaris Securities Co (寶來證券).

To secure stable returns, Lin advised investors to bet on industry leaders such as Taiwan's two largest slim-screen suppliers, AU Optronics Corp (友達) and Chi Mei Optoelectronics Corp (奇美電子).

In addition to electronics stocks, raw material suppliers, such as steel millers, and transportation companies are also good investment targets after a heady 2004 brought about by voracious demand from China, Polaris Securities said.

"The growth may start to slow as a result of Beijing's attempts to curb its overheating economy, but we believe they will be able to sustain their strong profitability this year as prices will at least remain at a high level," said Peter Tzeng (曾耀德), an analyst at Polaris Securities.

Tzeng suggested that investors snap up small-volume stocks in traditional industrial sectors in the current quarter, as these stocks may come down a little bit from their heights last year.

For those looking for long-term and stable returns, Polaris Securities suggested buying financial shares, as more mergers and planned privatizations of state-run financial institutions this year will give a boost to the sector's profitability.