The nation's technology stocks are the best targets for investment this year because of their low price-earnings (PE) ratio and healthy profit growth, said an executive at Cathay Securities Investment Trust (CSIT), which managed NT$110 billion (US$3.39 billion) in assets as of the end of last year.
CSIT president Jeff Chang (
"We suggest 60 percent of your portfolio to be invested in high-tech shares, 30 percent in traditional industry shares that benefit from the China market, and the remaining 10 percent for financial and real estate stocks," Chang said.
Chang recommended stocks of companies that manufacture flat TV panels, smart phones, light-emitting diodes (LED) and laptop computers as top choices among all technology shares.
Mike Chow (
As of September, the 12-month price-earning ratio forecast of technology stocks in Taiwan stood at about 14.2, while projected growth for earnings per share (EPS) was 19.7 percent, the Institutional Brokers' Estimate System showed.
During the same period, the average PE ratio and EPS growth for Asian stocks was 17.2 percent and 17.7 percent respectively.
Chang attributed the underperformance of Taiwanese stocks in the past few years to political factors.
He said that once the uncertainty over China-Taiwan relations clears after the election in March, net capital outflows will be averted and foreign institutional investors who are now waiting will also be vying to buy back their positions in Taiwanese stocks.
Though still positive over the growth of the consumer market in China, Chang said the demand for infrastructure and shipping capacities there could begin to slow down as the Beijing Olympics draw near.
"Among the so-called `China-concept stocks' that fall into the categories of traditional industries, those that are likely to continue growing in the Chinese consumer market will outperform their peers," Chang said.
Although the effects of the US subprime crisis and a slowing US economy will inevitably affect the performance of Taiwanese equities in the first half of this year, Chang told investors to expect a strong jump on stocks when all negative factors are cleared in the second half of this year.
"The tumultuous market these days is only the darkness before dawn," he said.
Taiwan's Weighted Stock Index rose 8.72 percent last year, compared with double-digit increases in some Asian markets.