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TAIEX may dip on Wall Street troubles

The local bourse is expected to fall when the market opens today, following on the heels of the plummet in the US stock market last Friday, analysts said yesterday.

The drop should not be drastic, however, and the market will rebound quickly, Mike Chow (周道中), a manager at Yuanta Core Pacific Capital Management (元大京華投顧), said in a phone interview.

The Dow Jones industrial average declined 366.94 points, or 2.64 percent, to close at 13,522.02 last Friday -- the 20th anniversary of Black Monday -- on lackluster corporate earnings, renewed credit concerns and rising oil prices.

"Factors that have existed for a quite period of time will weight down the Taiwan market for no more than two days," Chow said. "I estimate the benchmark TAIEX will fall by about 100 to 200 points on jitters."

The TAIEX closed down 0.26 percent at 9,611.72 in Friday's trading.

The US market will soon pick up its pace, rising as the Christmas holiday shopping season draws near, Chow said, adding that the local market will also benefit.

"Our prediction that the TAIEX will hit 10,000 points by the end of the year remains unchanged," Chow said.

Chow recommends investors purchase shares of electronics manufacturers, especially home electronics such as TV and flat-panel makers, which are expected to post robust sales and shipments during the peak fourth quarter.

Amid rising oil prices expected to keep fueling inflation, companies with rich assets and properties are among the top picks, he said.

Although financial stocks are expected to be hit by renewed credit concerns in the US, they should make a strong recovery as domestic consumption improves, Chow said.

With the credit abuse storm behind it, the nation's private consumption is expected to increase by 2.8 percent, according to a report released by the Chung Hua Institution for Economic Research (中經院) last Friday.

The easing credit crunch, along with the improving retail sector, low unemployment rate and reined-in inflation, indicate that the nation's economy is experiencing a steady upward trend, Sophia Cheng (程淑芬), president of Merrill Lynch Taiwan Ltd, told reporters last week.

The healthy economy will surely boost profitability among local companies, Cheng said, predicting that the nation's publicly listed companies may see profits grow at a compound annual rate of 20 percent from this year to next year.

Cheng played down the effect of the US market on the local market, saying the correlation between the two markets had decreased.

The bonds between the local bourse and other major Asian markets such as China, however, are getting stronger with the increasing proportion of exports to these markets, she said.

China, including Hong Kong, is the nation's largest export destination. For the first eight months of the year, Taiwan exported more than US$57.55 billion in goods to China and Hong Kong, accounting for 38.61 percent of total exports in the period, according to government statistics.

Exports to the US were US$20.31 billion, about 13.63 percent of total exports in the period, the statistics showed.
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