The nation's stock market is expected to continue its upward momentum into next year with a 10 percent upside in the benchmark index, backed by ideal industry fundamentals on China's booming economy, which offsets a potential negative impact caused by the US economic slowdown, analysts said yesterday.
"We are positive about the equity market in Taiwan next year," Rebecca Chen (
Prudential expects the TAIEX to hit 8,000 points, equivalent to a 10 percent upside from the current level, possibly at the end of the first quarter or the second quarter next year, Chen said.
As of yesterday, overseas investors had bought a net of NT$410.97 billion (US$12.48 billion) this year, according to statistics released by the Taiwan Stock Exchange yesterday.
Prudential Financial anticipated continuous funds inflow into the local bourse from foreign buyers next year who seek a higher return in emerging markets.
China's rapidly growing domestic demands driven by the 2008 Olympic Games and possible cross-strait opening-up could in turn support a bull market in Taiwan, it added.
Political risks and turbulence would not lead to grave bearishness as investors have grown resistant to such non-economic factors, Chen said.
The optimism seems to be shared by other equity research institutes, with UBS Securities expecting the TAIEX to peak at 8,166 points and JP Morgan predicting the benchmark index to exceed 8,000 points, boosted by robust corporate earnings growth of 20 percent on average next year.
Prudential Financial recommends electronics stocks, including handset makers benefiting from replacement demand in emerging markets, electronics manufacturing services, providers of vertical integration advantages like Hon Hai Precision Industry Co (鴻海精密), liquid crystal display TV components suppliers and game console makers.
Companies supplying China's booming domestic demand, like food producers and retail/distribution channels, are expected to experience lucrative business in the coming year, the company said.
Other investment picks include property developers and tourism stocks for the nation's robust housing market based on a potential relaxation in restrictions on Chinese tourists visiting Taiwan, it added.
On global equity markets, stocks are likely to extend gains with attractive valuation into next year without the headwinds of high crude oil prices, interest rates hikes and rising inflation seen this year, said John Praveen, managing director of Prudential International Investments LLC.