Taiwan's technology firms are favorable short-term investment targets as robust demand should counter fears of reduced orders from US customers amid weak US consumption and rising oil prices, an analyst with Morgan Stanley said yesterday.
Stock prices of Taiwanese electronics fell 5.7 percent last month, dropping farther than the 4.4 percent overall decline of the TAIEX stock index, on concern that demand for electronics would fall, Morgan Stanley said.
"We still think tech shares have a chance to lead a market rebound in the next couple of months [on strong profit growth]," Morgan Stanley strategist Dickson Ho (
"Tech end-demand is still looking fine," Ho said in the report, citing fewer US firms giving negative prospects amid recent high oil prices of around US$70.
Chipmaker ATI Technologies Inc is the only technology firm to have issued a performance warning, blaming shrinking market share rather than slow demand, he wrote.
Fueled by strong demand, Taiwan's technology companies should see profits jump 50 percent this quarter from the previous quarter, Ho wrote.
Another 23 percent expansion should be seen in the final quarter of this year, according to Ho.
"We believe better performance numbers released over the next few months could drive a share-price rebound for the sector," Ho wrote.
Ho said he maintains his "overweight" rating on six Taiwanese technology firms, including MediaTek Inc (聯發科技), the world's biggest maker of chips for DVDs, and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world's top contract chipmaker.
Advanced Semiconductor Engineering Inc (
Ho also picked Compal Electronics Inc (
In addition to the bright outlook, better-than-expected second-quarter results should further negate investors' concerns about local technology shares, Ho wrote.
Taiwanese electronics companies under Morgan Stanley's coverage, including Hon Hai Precision Industry Inc (
Taiwanese technology firms reported a 14 percent expansion in profits in the second quarter, compared to the 1.2 percent growth projected by Morgan Stanley, according to the report.