BNP Paribas predicting a `fast in, faster out' bourse

The local bourse is expected to experience a "fast in, faster out" capital-driven market next month as the Morgan Stanley Capital International (MSCI) increases its status gauge for the Taiwan stock market to the full weighting, analysts at BNP Paribas Securities Taiwan Co said yesterday.

But the rising momentum of the benchmark TAIEX will be limited if the MSCI effect fades, they added.

Peter Kurz, managing director and head of corporate finance at BNP Paribas Securities, said overseas investors did not reap as many profits as expected after pouring money into the local stock market last November to bet on the MSCI factor.

Additionally, the market fundamentals in the second quarter did not seem active in the wake of weak steel and foundry industries, Kurz said on the sidelines of a press conference for the securities house's opening yesterday.

MSCI's removal of the Limited Investability Factor that had been applied to Taiwan's bourse was to be undertaken in two stages. The first revision occurred on Nov. 30 last year, when MSCI changed the weighting of its Taiwan Index from 55 percent to 75 percent.

The final revision will be made on May 31, when the weighting of the Taiwan Index will be removed so that the benchmark will fully reflect the listed prices of Taiwan's securities.

The TAIEX yesterday rose 64.00 points, or 1.1 percent, to 5,842.27 on turnover of NT$50.21 billion (US$1.6 billion), according to stock exchange data.

But the nation's stock market is volatile because of political factors, resulting in the second-smallest increase in a benchmark index in Asia last year, Kurz said.

Overseas investors would still favor the big-cap tech stocks, he added.

Jesse Wang (王嘉樞), the securities house's head of research who specializes in finance stocks, said that the finance stocks outlook did not look rosy due to the effects of slowing economies worldwide.

The analyst, who predicted earlier this month that finance shares would drop 10 percent on average this year, said they have seen a decline of 6 percent so far and expect another 4 percent to follow.

BNP Paribas Securities is maintaining an underweight rating for the nation's finance stocks, according to the securities house.

A rebound of finance stocks in the second half of this year could only rely on bullish factors such as large-scale mergers between financial holding companies.

The attitude of the Ministry of Finance, which governs a number of financial service providers, would be key to any rebound, Wang said.

The picks of financial stocks included Fubon Financial Holding Co (富邦金), which enjoyed reduced costs of up to NT$1.5 billion following absorption of TaipeiBank (台北銀行); Mega Financial Holding (兆豐金), which has had relatively low share prices; and E.Sun Financial Holding Co (玉山金控), owing to decent profitability and reports of a possible merger, BNP Paribas said.