The local stock market is likely to benefit from the country’s excess capital and begin a solid rebound as early as next quarter, despite the flat full-year macro-economic fundamentals, fund managers at Fubon Asset Management Co (富邦投信) said yesterday.
The nation’s NT$6 trillion (US$171 billion) idle capital has to find a way out as it searches for investment destinations with a high cash dividend yield, such as equities with an attractive valuation, executive vice president Andy Wu (吳火生) said.
Wu expects the benchmark TAIEX to hover around the 4,500 point level in the first quarter on deepening recession, but sees a 30 percent spike to about 5,800 points after the local economy hits rock bottom in the fourth quarter of this year or early next year.
The TAIEX yesterday added 9.51 points, or 0.2 percent, to close at 4,435.34 points after falling as much as 2.2 percent in the morning session.
With the benchmark’s record-low price-to-earnings and price-to-book ratio, equities will present the best return, compared with time deposits with a below 1 percent interest rate or 10-year government bonds with a 1.5 percent interest rate, he said.
For example, bellwether chipmaker Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) NT$3 cash dividend, if finalized in its June shareholders’ assembly, could translate into a 7 percent return in a year, excluding capital gains once its share price increases, Wu said.
He said that many domestic institutional investors such as life insurers would be under pressure to use their idle capital and seek share investments next quarter to repay their funding costs, which could be at more than 3 percent.
In anticipation of a pickup in investment momentum during the next quarter, Fubon Asset Management yesterday announced it would launch the nation’s first corporate social responsibility (CSR) fund with a portfolio focusing on domestic listed companies that in addition to growth and earnings fulfill their social responsibilities.
President Henry Lin (林弘立) yesterday expressed confidence in the fund’s potential and returns in the local market after similar funds attracted US$1.9 trillion worldwide between 2005 and 2007.
Lin expects the CSR fund, whose size will be capped at NT$5 billion with a 30-day lock-up period, to attract capital of between NT$2 billion and NT$3 billion before next Friday.
He also vowed to make efforts to facilitate the establishment of a third-party CSR index in Taiwan, similar to the Dow Jones Sustainability Index, the FTSE4Good Index, the Environmental All-Share Index and the Domini 400 Social Index.
As the TAIEX has hit bottom, fund manager Eric Li (李俊毅) yesterday said the company’s CSR fund could see a return of between 10 percent and 15 percent toward the end of this year.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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