UBS AG cut its forecast for Taiwan stocks by 9 percent to 8,000, saying the economy may have peaked and technology shipments will return to “normalized” levels.
The new year-end estimate represents a 5.3 percent gain from yesterday’s close for the TAIEX, which rallied 78 percent last year. The benchmark measure added 0.3 percent to 7,620.47 at noon, narrowing its loss for the year to 6.9 percent.
“Based on expectations for peaking macroeconomic indicators and more normalized bottom-up shipment data, we believe market conditions are likely to be more choppy this year,” UBS analyst William Dong (董成康) wrote in a report yesterday.
Dong, who had previously forecast 8,800 for the TAIEX this year, said a “less upside surprise on order shipments” in the technology sector “effectively removes one catalyst for the market.”
Taiwan’s economy exited the deepest recession on record last quarter as the global recovery spurred demand for the nation’s semiconductors and mobile phones.
GDP rose 9.2 percent in the three months to Dec. 31 from a year earlier, the statistics bureau said on Feb. 22 in Taipei. That exceeded all estimates in a Bloomberg News survey of nine economists, where the median forecast was for a gain of 7.1 percent.
UBS also said a potential trade accord with China, also known as an economic cooperation framework agreement (ECFA) would not be a sustainable long-term driver for the market.
“We believe [an] ECFA will only put Taiwan on equal footing with its regional trading partners, but will not provide a significant boost to its GDP growth,” it said.
China is prepared to sacrifice some of its interests in order to reach an agreement, Premier Wen Jiabao (溫家寶) said during a Webcast from Beijing on Saturday, Xinhua news agency said. It will take into consideration the interests of Taiwan’s small and medium-sized companies and the public, especially Taiwanese farmers, Wen was cited as saying.
The two sides will hold a second round of talks on a trade accord this month, Chao Chien-min (趙建民), a deputy minister at the Mainland Affairs Council in Taipei, said by telephone on Monday.
In related news, Tu Jin-lung (杜金龍), chairman of Grand Cathay Investment Services Corp (大華投顧) — a subsidiary under China Development Financial Holdings Co (開發金) — yesterday forecast the TAIEX may experience downward corrections until it hits the lowest of 6,700-point level in around May or the 6,100-point level in around August.
But after those two lowest levels are challenged, the TAIEX may see a solid rally to test the another high of about 8,400 points before June next year, he said.
ADDITIONAL REPORTING BY JOYCE HUANG
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