Investors should buy Taiwanese property stocks that have trailed behind other industries, said Peter Kurz, Citigroup Inc’s head of Taiwan research.
An index of 35 construction companies has gained 5 percent over the past six months, ranking the industry 16th among 28 groups on the Taiwan Stock Exchange.
“You can start looking at the laggard sectors,” Kurz, whose team was ranked first for Taiwan research by Institutional Investor for 2008 and last year, said in an interview in Taipei yesterday. “Property went flat for the whole second half of the year,” he said, declining to name any stocks.
The benchmark TAIEX index gained 78 percent last year as improving relations with China boosted capital inflows. The signing of an economic cooperation framework agreement (ECFA) between Taiwan and China later this year may be the catalyst for the nation’s stocks to fall “sharply,” as investors may find the substance of the accord “disappointing,” Kurz said.
Taiwan’s stock market may be “more or less where it is right now” in 12 months, “or maybe slightly higher,” Kurz said.
In the meantime, given the nation’s strengthening currency, buying property shares as part of a “sector rotation” strategy will be “relatively safe,” he said.
Capital flows into Taiwan from the mainland will boost property companies, he added.
“A short squeeze is taking place in the market,” Kurz said. “You’ll get the share price pushed up very high, then in the second-half of the year or early into next year, you will get a scenario where you can get a pullback in the market.”
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