Analyst advises investor caution

Investors should remain cautious this week, as the bull market of the local bourse led by seemingly easing concerns over inflation last Friday may not last long, an analyst said yesterday.

"Conservativeness seems to be the best policy in light of some uncertainties," Clive Hsueh (薛宗傑), manager of the proprietary trading group at IBT Securities Co (台灣工銀證券), a subsidiary of the Taipei-based investment bank Industrial Bank of Taiwan (台灣工銀), said in a telephone interview yesterday.

The upside could be limited, with a peak of the benchmark index no higher than a level of 6,700 points during the course of this week, he said.

If the weak performances of some heavyweight players such as handset maker High Tech Computer Corp (HTC, 宏達電) and Epistar Corp (晶圓光電) which makes chips that run light-emitting diodes in mobile phones continue, the market could be depressed this week, Hsueh said.

The fact that last week, China ordered Chinese commercial lenders to increase reserves as one of its latest bids to curb sizzling investment in factories and properties could also overshadow the export-oriented high-tech stocks, the analyst said.

It is yet to be determined if the rebounds of international markets have ended the correction cycle and are sustainable, he added.

The TAIEX gained 149.38 points, or 2.32 percent, at 6,575.77 on Friday, the largest rise in seven months, prompted by strengthening international markets after US Federal Reserve Chairman Ben Bernanke eased concerns over inflation.

Nevertheless, HTC shares fell due to rising concerns over the contracted handset manufacturer's move into the brand name business after its acquisition of local mobile phone vendor Dopod International Corp (多普達) earlier this month.

The local bourse is expected to experience another peak of up to 7,400 points in September, bolstered by the traditional high season for the high-tech sector, a strengthening currency that could attract overseas investors, and the promised relaxation of cross-strait restrictions, Barits International Securities Co (倍利國際證券) said last week.

Against the backdrop of appreciating Asian currencies, mild inflation, and further cross-strait liberalization measures such as the opening of Taiwan to Chinese tourists which would all heat up the nation's property market, investors are advised to cash in on asset plays, like constructors and life insurers, and tourism stocks, IBT Securities said.

Investment picks include Ruentex Development Co (潤泰創新國際), Cathay Life Insurance Co (國泰人壽), Shin Kong Life Insurance Co (新光人壽), Formosa International Hotels Corp (晶華酒店) and the Ambassador Hotel Ltd (國賓飯店), the securities house said.

Solar cell makers like Motech Industries (茂迪) are ideal targets too, as they are anticipated to benefit from the promising prospects of the solar energy industry amid sky-high energy prices, it added.