The TAIEX is likely to bottom out in the first quarter of this year at the earliest and the economy may rebound by the end of the year, Cathay Securities Investment Trust (國泰投信) president Jeff Chang (張錫) said yesterday.
“The TAIEX is still bottoming out, but it will usually rebound two or three quarters before an economic recovery, which is likely to emerge in the fourth quarter,” Chang told reporters at a media briefing, organized by the Securities Investment Trust & Consulting Association.
Chang estimated that the local benchmark would find strong support at the level between 4,100 points and 4,500 points, which represents a price-to-book ratio of between 1 and 1.1, for equity investors to hunt for bargains.
The TAIEX rose 1.32 percent yesterday to close at 4,789.84 points on turnover of NT$96.723 billion (US$2.93 billion). The benchmark index rose for a third consecutive day and has increased 4.33 percent this week.
Yesterday’s rise was broad-based, with shares in the petrochemical and construction sectors leading the way, SinoPac Securities Corp (永豐金證券) said in a client note yesterday.
Three major institutional investors remained net buyers of Taiwanese equities, buying a net NT$6.03 billion in local stocks yesterday, while foreign institutional investors bought a net NT$5.14 billion, the Taiwan Stock Exchange’s tallies showed.
No matter how the economic recession protracted in the first half, an attractive valuation has presented investment opportunities for long-term gains, Chang said.
He urged investors to look for stocks with healthy balance sheets, a dividend yield of greater than 8 percent and future potentials that would “definitely pay off in two to three years.”
Chang said that the local bourse would continue its correction this year and estimated the TAIEX may return back to the level of between 5,000 points and 6,000 points by the end of the year — if government efforts are successful in minimizing the anticipated damage to the financial market.
Meanwhile, the association’s survey yesterday found that 19 percent of respondents invested in funds because they had idle money at hand, followed by 11.5 percent who said that they invested in funds because they were recommended by fund managers at their bank.