With Taiwan's stocks hitting 20-month highs recently, analysts are bullish on the local bourse, predicting the benchmark index will likely break the 7,000 point-level before the Lunar New Year on Jan. 29.
While there is some profit-taking pressure, the outlook will remain bullish and shares will climb higher, driven by abundant capital inflows and belated gains compared with international markets, they said.
"We believe that the TAIEX stands a good chance of hitting a five-year high by shooting past 7,000 points prior to the [Lunar] New Year [at the end of this month]," said George Hou (
Vigorous capital stimulus is expected to go on, with continuous inflows from both foreign institutional investors and local retail investors, Hou said.
The TAIEX closed at 6,548.34 at the end of last year, marking a 6.7-percent increase, with foreign net buying reaching a record high of NT$719.41 billion (US$21.9 billion). Foreign holdings accounted for a record 31.73 percent of total market value, according to Taiwan Stock Exchange (TSE) statistics.
Since the Taiwan market's price-earnings ratio (P/E ratio) remains relatively low, at about 12, compared to that of other major markets in the world, Hou predicted more upside potential ahead.
P/E ratios are commonly used by investors to measure how expensive a stock is relative to similar stocks. The lower the ratio, the more growth potential the company's stock has.
While President Chen Shui-bian (
For the first week in January, the TAIEX rose 146.48 points or 2.24 percent to 6,694.82, with daily turnover exceeding an average of NT$150 billion each day, according to TSE statistics. Overseas investors bought a net NT$23.978 billion (US$744.7 million) last week, the TSE said.
The market is likely to see another high in the third quarter reflecting optimism about the following high season in the last quarter, after weathering a slow April to June period. That market could lag in the second quarter due to the release of last year's annual financial reports and possible selling pressure from high-tech employees who are subject to the taxation of their stock bonuses under the new alternative minimum tax scheme, Hou said.
Other foreign brokerages shared bullish views as well, with Deutsche Securities Asia Ltd saying last week that the liquidity in Taiwan's market has become more positive.
"We expect foreign interest for Taiwan equities to remain positive on the back of stronger earnings growth outlooks, driven by an extended technology cycle, positive fund flows and attractive valuation with reduced political risk premium," Krista Yue (
A pickup in retail trading that accounted for an average 80 percent of daily turnover in the past few weeks, up from around 70 percent in the early months of last year, is expected to drag on to support the market's positive liquidity, Yue said.
Similarly, Morgan Stanley's Asia-Pacific strategist Malcolm Wood expressed his optimism late last month, saying that "Our key overweight market is Taiwan ... one catalyst could be an earnings growth."
Taiwan has been a significant underperformer, impeded by concerns about ongoing local investor selling, a poor political outlook, a consumer credit crisis and a possible currency crisis, Wood said.
However, "We see local investor selling as manageable, the consumer credit problem as far smaller than the Korean experience, a poor political outlook as fully discounted and a low risk of a currency crisis," the analyst added.
Bullish as foreign investors are, potential risks may dog the market, including crude oil prices that would remain high on tight supply this year, the US property bubble that could jeopardize buying power and a potential bird flu pandemic, according to Jih Sun Securities Investment Trust Co (
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last