Investors should lower their holdings in China stocks, Asia’s best performers in the last three months, and instead buy Taiwanese shares, UBS AG said.
China was cut to “neutral” from “overweight” by Niall MacLeod, a Hong Kong-based strategist at UBS, as the market will “take a breather” after rallying since November. Taiwan was raised to “overweight” from “underweight” because technology shares may start to outperform, the strategist said.
China’s Shanghai Composite Index has surged 17 percent in three months, while the Hang Seng China Enterprises Index, which tracks so-called H shares traded in Hong Kong, has gained 8.4 percent.
The MSCI Asia-Pacific Index was little changed during the period, while Taiwan’s Taiex index rose 2.1 percent.
“In recent weeks, it looks like leading indicators may be bottoming,” MacLeod wrote a report yesterday. “Historically, Asian cyclicals have typically performed relatively well when leading economic indicators start to turn from their lows.”
Stocks in China and in Hong Kong have rallied from their lows on speculation that government spending will bolster economic growth.
The Shanghai Composite has surged 29 percent since the package was announced on Nov. 9.
China’s economy may expand 6.6 percent in the second quarter, according to the median estimate of 14 economists surveyed by Bloomberg News.
That’s faster than the 6.3 percent growth in the previous three months, the weakest pace since 1999, signaling that the stimulus package is taking effect.
“China looks set to be the first major economy to recover from the current global meltdown,” said Lu Ting (陸挺), an economist with Merrill Lynch & Co in Hong Kong. “China is the only economy in the world to see significant growth in credit to corporate and household sectors after September 2008, when the financial crisis worsened to a near-collapse.”
UBS said yesterday that it removed China Mobile Ltd (中國移動通信), the world’s largest wireless-phone company by users, and China Resources Power Holdings Co (華潤電力控股), the third-largest Hong Kong-listed Chinese generator by market value, from its list of recommended stocks.
“We have liked China due to the reflationary potential in that country,” the strategist said. “But this seems well understood now.”
The strategists raised technology shares to “overweight” from “underweight” as inventory levels fall and the slump in demand starts to slow, UBS said yesterday. That boosted the outlook for Taiwan, whose TAIEX gets about 45 percent of its weighting from technology, the strategist said.
The brokerage raised its rating on United Microelectronics Corp (聯電), the world’s second-largest custom chipmaker, as well as chip testers Advanced Semiconductor Engineering Inc (日月光半導體) and Siliconware Precision Industries Co (矽品精密).
“Technology has lagged the other sectors in the cyclical space,” the strategist wrote. “Valuations in a relative sense compared to history look better and the global industrial production nature of the pro-cyclical story is more ‘playable’ in Asian tech than other cyclical sectors.”
Asian utilities and telecoms were cut to “underweight,” MacLeod wrote, saying that so-called defensive stocks are likely to lag behind.
Gogoro Inc (睿能創意) yesterday launched its first electric bicycle, the Gogoro Eeyo 1, in Taiwan, after unveiling the bike in New York in late May and in France on Tuesday. The company said it would also introduce the series in other European countries such as Germany and the Netherlands. The “Eeyo project” is the fourth of Gogoro’s eight projects that concentrate on smart transportation, which includes Gogoro’s electric scooter, battery swap system and electric scooter sharing service, company founder and chief executive officer Horace Luke (陸學森) told a media briefing in Taipei. “There are various types of city commuters. We will not
With the US dollar expected to weaken in the next 12 months due to near-zero interest rates, investors should consider purchasing US corporate bonds, Standard Chartered Bank Taiwan Ltd (渣打台灣銀行) said on Thursday. The bank said that the US Federal Reserve since last month has been buying bonds issued by US companies to curb default rates. The US dollar is forecast to be weaker against the pound, the euro and the yen, as well as the Canadian dollar, the Swedish krona and the Swiss franc, as the greenback lacks high investment returns after the Fed in March slashed the benchmark interest rate
BAD RAP: The exchange said Tatung had seriously breached shareholders’ rights and failed to give a satisfactory explanation of its board election dispute Tatung Co (大同) shares yesterday plunged by the maximum daily limit of 10 percent to NT$18.90, the lowest in three months, after the Taiwan Stock Exchange (TWSE) on Tuesday evening changed the company’s classification to a full-delivery stock effective tomorrow. The TWSE’s move follows the company’s failure to give a clear and satisfactory explanation of why it deprived dozens of shareholders of their voting rights during a board election at the annual shareholders’ meeting on Tuesday morning. Under the exchange’s regulations, investors are not allowed to engage in margin trading of a full-delivery stock, TWSE spokeswoman Rebecca Chen (陳麗卿) told
SIZE MATTERS: Medium-sized hotels that do not have the support of parent groups are more vulnerable and are forced to take action, a REPro Knight Frank researcher said About 50 hotels across Taiwan are seeking to exit the market as they succumb to the bleak business outlook amid international travel restrictions imposed to combat the COVID-19 pandemic. Yomi Hotel (優美飯店) on Minsheng E Road, Sec 1, in Taipei is seeking to transfer ownership with an asking price of NT$950 million (US$32.15 million) and a pledge for a lease contract that guarantees a 3 percent return. The budget hotel, with room rates that start from NT$1,400 per night, maintains normal operations, but has been struggling since March, when the government placed restrictions on inbound and outbound travel. Occupancy rates for hotels in