Wed, Dec 09, 2009 - Page 12 News List

Economic growth to be slower than expected: Fubon

By Joyce Huang  /  STAFF REPORTER

Fubon Securities Investment Services Co (富邦投顧), a subsidiary of Fubon Financial Holding Co (富邦金控), yesterday said the local economy may see 3.5 percent to 4 percent growth next year, lower than the Directorate-General of Budget, Accounting and Statistics’ (DGBAS) projection of 4.39 percent, on a slower-than-expected buildup of inventory.

The securities firm, however, is upbeat about a rally on the TAIEX next year after the nation signs an economic cooperation framework agreement (ECFA) with China.

Julia Chen (陳艾儒), vice president of the firm’s research department, said yesterday she believed the DGBAS had overestimated the possible 2 percentage point contribution from the inventory buildup to the nation’s GDP next year.

As the world slowly emerges from the economic slump, it is unlikely that retailers will accelerate their buildup of inventory, she told an investment outlook forum yesterday.

The shortened life cycle of electronic products will also force retailers to optimize their inventory, she said.

Amid a mild recovery, analyst Rick Lo (羅瑋) yesterday ruled out the possibility of the world economy and the local economy dipping again before February except in countries such as ­Japan and Ireland.

Governments around the world have committed to keeping their stimulus measures, which will help sustain momentum similar to that between 2002 and 2003, he said.

In Taiwan, closer ties with China will provide a catalyst to boost the local bourse’ capitalization next year on top of the nation’s improving economic fundamentals, Charles Hsiao (蕭乾祥), president of the securities firm, told the forum.

Rallies on the TAIEX will be ­liquidity-driven by future capital injections from domestic, overseas and incoming Chinese investors, he said.

“In the next three years [after Taiwan signs an ECFA with China in the middle of next year], the TAIEX may more than double,” he said, citing experiences in the bourses of Mexico and Hong Kong.

The Mexican bourse rose 271 percent in the three years after it signed a free-trade agreement with the US in 1995, while the Hong Kong bourse rose by 282 percent in 2007 after the territory signed a closer economic partnership arrangement with China in 2003, he said.

Hsiao said the TAIEX would peak in the first and the fourth quarters of next year although he also warned that downward corrections may take place in the second and third quarters.

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