Investors should buy Taiwanese financial and property stocks to benefit from the prospects of closer ties with China after incoming president Ma Ying-jeou (馬英九) takes office today, JF Asset Management Ltd said yesterday.
Ma “is going to speak more friendly to China,” said Peter Tang, a Hong Kong-based portfolio manager at JF Asset Management, overseeing the US$1.3 billion JF Taiwan Fund.
“He’s going to announce policies to let mainland Chinese travel to Taiwan in July, and also will open weekend chartered flights from China to Taiwan,” Tang said at a media briefing in Hong Kong. “These policies are going to help Taiwan’s economy and stock market in the long term.”
The TAIEX’s 16 percent gain in US dollar terms this year makes it the best-performing major Asian benchmark among those tracked by Bloomberg, amid anticipation warmer cross-strait ties will boost trade and raise some companies’ earnings.
“Taiwan has outperformed the region so much year to date, and I expect a lot of good news already priced in, so short term we might see consolidation,” Tang said. “For the next two years though, I’m quite positive on Taiwan.”
The TAIEX is valued at 14.5 times 2008 profit, less than the MSCI Asia Pacific Index’s 16 times, Bloomberg data shows.
JF Taiwan Fund is overweight on non-tech stocks, namely developers, asset plays, finance and tourism-related shares, Tang said.
“We are ‘underweight’ on tech because we worry about demand from the US,” he said.
Still, Tang expects the US market to stabilize and demand for tech products to recover next year.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which climbed 12 percent this year, accounted for 6.9 percent of JF Taiwan Fund and was its No. 1 holding, data released by JF Asset Management at yesterday’s briefing showed. TSMC is the largest custom-chip maker in the world.
Cathay Financial Holding Co (國泰金控) made up 5.2 percent of JF Taiwan Fund, the second-biggest holding, the data showed. Cathay Financial, Taiwan’s largest financial-services company, soared 23 percent this year.
“As people have more confidence and unemployment rate gets lower, people have more security for the future, and banks will be able to lend to more people,” Tang said. “This is going to help the financial sector in Taiwan.”
Domestic infrastructure-related stocks are also likely to benefit in the third year after Ma’s policies improve the economy and business environment, Tang said.
“Investors expect the cross-straight relationship to improve, the domestic economy of Taiwan to pick up and consumer confidence levels also to recover,” Tang said.
“So we see a good chance for Taiwan to perform better in the longer term,” he said.
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