Taiwan’s stock market will likely rise in the second half of this year on expectations brought by the Chinese Nationalist Party’s (KMT) China policy before next year’s presidential election, equity strategists said yesterday.
The benchmark TAIEX yesterday closed 0.15 percent, or 13.28 points, higher at 9,033.68, with daily trading value standing at NT$109.9 billion (US$3.82 billion), Taiwan Stock Exchange data showed.
With the election scheduled to take place in January, JPMorgan expects President Ma Ying-jeou (馬英九) to pursue re-election by pushing upsides to his cross-strait policy, to boost the stock market in the second half of this year
“Given that macro-economic conditions are not something he can control, we believe he will aim to deliver on his China policy,” JPMorgan analyst Nick Lai (賴以哲) said in a report on Wednesday.
The upsides include the seventh round of cross-strait negotiation likely to take place either next month or in July, allowing individual Chinese tourists to travel in Taiwan — which could begin in July — and expanding on the Economic Cooperation Framework Agreement (ECFA) by signing service and merchandize trade agreements, he said.
Additional cross-strait negotiations would drive up the TAIEX, since during five of the six previous talks, Taiwan’s stock market outperformed the rest of Asia, except Japan, within one month of the event, Lai said.
The relaxation of rules governing visits by individual Chinese tourists and two other cross-strait tourism policies — the daily arrival limit on Chinese tourists and weekly direct flights, which could be relaxed in the second half of this year — might be another driver for the tourism and aviation sectors, Lai said.
Tsai Ming-chang (蔡明彰), president of Marbo Securities Consultant Co (萬寶投顧), said the KMT’s opening toward China and the remaining strong inward capital flow to the stock market could drive up the TAIEX ahead of the January election to beyond 9,309, the highest since Ma took the office in May 2008.
“The TAIEX could climb up to 9,500 or 9,600 in the second half of this year,” Tsai said by telephone yesterday.
However, the TAIEX will not be able to sustain a high of 9,500 for too long amid the slowing momentum of economic growth in the second half of this year, Tsai said.
He suggested investors focus on stocks benefiting from the government’s China policy, such as cross-strait stocks and the financial sector, and buy high-yield stocks to take profits in the third-quarter dividend season.
However, the technology sector might underperform other sectors in the second half of this year because of the strength of the New Taiwan dollar against the US dollar, Tsai said.
JPMorgan also kept its underweight grading to overall technology stocks, while maintaining its overweight grading to financial, discretionary and high-yield stocks in its Taiwan portfolio.