Mon, Mar 14, 2011 - Page 12 News List

Earthquake unlikely to impact TAIEX

SILVER LINING:Analysts have so far concluded that damage to plants in Japan as a result of the earthquake could actually benefit local manufacturers in the short-term

By Amy Su  /  Staff Reporter

Fund managers and analysts generally believe the local stock market will not be influenced negatively by Japan’s massive earthquake, as stocks of electronic component, digital camera and solar power manufacturers will benefit most from orders shifting from Japan.

Eric Li (李俊毅), a fund manager at Allianz Global Investors Taiwan Ltd (德盛安聯證券投信), said in a press release issued on Friday that the quake would not have a negative impact on the performance of the Taiwan Stock Exchange because history showed little relationship between the Japanese stock market and Taiwan’s.

Stock analyst Lai Sian-jheng (賴憲政) also said the local bourse would not decline because of the quake.

“For Taiwan’s stock market, the quake brought more upsides, instead of downsides,” Lai said by telephone yesterday.

The biggest-ever quake in Japan led to a temporary shutdown of many Japan-based corporations in the semiconductor, electronic component and petrochemical -industries, including Elpida Memory Inc, Fujitsu Ltd, Sony Corp and Toshiba Corp.

“That will benefit local electronics stocks as orders move from Japan to Taiwan, with passive component, digital camera and solar power makers benefitting most,” Lai said.

Wang Tsung-chieh (王宗傑), a fund manager at HSBC Global Asset Management, said local stocks of high-end components would benefit more from short-term or rush orders, because the production of most low-end components was already oursourced to Taiwan and China.

However, the quake could have limited gains in short-term orders for Taiwan’s DRAM chipmakers, because South Korean DRAM companies might take most orders shifting from Japan, Lai said.

“DRAM prices will pick up owing to the decreasing output in Japan after the quake, which is good news for local DRAM stocks,” he said.

Local electronic corporations with plants in Japan, such as Advanced Semiconductor Engineering Inc (日月光半導體), United Microelectronics Corp (聯電) and AU Optronics Corp (友達光電), might face short-term impact by the plant’s short-term shutdown, but the impact would be limited because their capacity in Japan is at a low level, Lai said.

Domestic downstream manufacturers that rely on Japan for the supply of key parts might be influenced by supply shortages, Lai added.

Lai said petrochemical stocks would get the biggest benefit from possible orders transferring from Japan, after a fire following the massive quake broke out in the refinery of Cosmo Oil Co, the fourth-largest oil company in Japan.

Steel, cement and glass firms could also be helped by post-quake reconstruction, but the help would be slight, while related industries in Japan would recover at a faster-than-expected pace, Lai said.

“But these shares are still expected to shore up the stock market in the coming days, driving up the potential upside,” he said.

The benchmark TAIEX dropped 2.47 percent from a week earlier to close at 8,567.82 last week, with share prices for computers and peripheral equipment tumbling 5.62 percent, Taiwan Stock Exchange Corp data showed.

Foreign investors sold a net NT$13.77 billion (US$465.22 million) of stocks on Friday, with net selling reaching NT$18.72 billion this month, stock exchange data showed.

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