The benchmark TAIEX is expected to fluctuate after encountering technical resistance at the 7,000 point level, but could test the 7,600 point level in the upcoming year if risk appetite among global investors remains high, Lim Say Boon (林哲文), chief investment strategist of Standard Chartered Bank’s wealth management group, told an outlook presentation in Taipei yesterday.
Closer business ties with China and the anticipated economic recovery in years to come will also contribute to the rise on the bourse, he said.
In the long run, Lim said he was highly optimistic, as “the global recession is almost over now” amid recovering global confidence and markets turning from oversold to overbought.
There is a possibility, he said, that the S&P500 index in the US would move toward the 1,000 point level from its level below 990 points, while the MSCI emerging market index could move toward the 895 point level from the current 840.
Ample liquidity and historical low valuations will bolster the equity market’s uptrend in the long run, he said.
But Lim also warned of growing risk of market corrections as the global economy is entering an inventory re-stocking cycle rather than a solid product cycle.
As the saving rate in the US climbed to 7 percent from its lowest at minus 2 percent, US consumers can only provide the world with “basic demand” while the global economy has to find new growth drivers such as increased consumption by middle-class earners in emerging markets or increased investment in alternative energies or infrastructure in emerging markets to offset the flat demand by consumers in the US.
Lim recommended that investors buy long-term objectives and refrain from short-term trading strategies because statistics showed that every dollar invested in the stock market in 1997 would see an annualized 10 percent return despite recessionary declines.
Against a weakening US dollar, Lim said that gold prices could reach US$1,050 per ounce over the next six to nine months.
Crude oil prices, meanwhile, would likely strengthen to US$80 per barrel by the end of the year, mostly on rising demand in China, Lim said.