Shares rose yesterday, led by Hon Hai Precision Industry Co (鴻海精密), after bigger-than-estimated increases in US durable-goods orders and new-home sales boosted optimism that growth will weather the subprime crisis in the world's biggest economy.
"Recent US economic reports showed sustainable demand," said Celine Chiang, who helps manage US$1.7 billion at IBT Securities Co(
Largan Precision Co (
The TAIEX added 28.22, or 0.3 percent, to close at 8,718.31. About the same number of stocks gained and declined. Futures due in September rose 0.4 percent to 8,637.
Hon Hai, Taiwan's biggest electronics exporter, jumped NT$10.50, or 4.6 percent, to NT$240.50. Innolux Display Corp (群創光電), the world's second-largest maker of flat-screen computer monitors, added NT$4.50, or 3.3 percent, to NT$141.50. Far Eastern Textile Ltd (遠東紡織), the nation's biggest fabrics maker, rose NT$1.05, or 3 percent, to NT$36.25.
US orders for goods made to last several years advanced 5.9 percent last month, the US Commerce Department said on Friday. Economists in a Bloomberg survey had expected a gain of 1 percent. Purchases of new homes increased 2.8 percent to an annual pace of 870,000, exceeding the highest estimate in a Bloomberg survey. The US is Taiwan's largest export market after China.
Investors should be "underweight" in Taiwanese equities, or hold less of the nation's shares than their representation on regional stock benchmarks, Bernard Liu, Raymond Hung and Adrian Mowat wrote in a note to clients dated yesterday. The strategists left their forecast for the TAIEX index unchanged at 9,000.
"Looking ahead, we expect Taiwan to underperform Asia ex Japan," the strategists wrote in the report.
"While our base case US macro view remains pro-growth, the key marginal risk lies in the US consumer outlook," they said.
JP Morgan's top picks in Taiwan include Far Eastern, the country's biggest fabrics maker, according to the note.
Investors should avoid stocks such as Largan, a maker of optical lenses and shutters for digital cameras, and Sunplus, it said.
Largan declined NT$8, or 2.7 percent, to NT$283.50. Sunplus, a chip designer, slipped NT$1.50, or 2.3 percent, to NT$63.80.