Citigroup Global Markets said yesterday it maintained a previous forecast that the TAIEX would hit 10,000 points this year, partly on strong capital inflows.
Meanwhile, the presidential election scheduled for January next year is expected to prompt the government to support the local stock market in the run-up to the election to secure victory and stay in power as past governments had done, the brokerage said.
With closer business ties across the Taiwan Strait and relaxed cross-strait investment rules, Citigroup said, the Chinese Nationalist Party (KMT) government has encouraged Taiwanese investors operating in China to repatriate funds.
Citigroup said if both sides eliminated double taxation, the capital repatriation from China to Taiwan could total US$40 billion a year.
Authorities on both sides are aiming to sign an agreement in this area, but further negotiations are needed to cut a deal.
As for a likely rally because of the presidential election, Citigroup said the upswing is unlikely to come into full force until the fourth quarter this year, while bank stocks may lead gains as the sector is the most sensitive to government policies.
In addition to the financial sector, Citigroup is upbeat about share price gains posted by the local foundry sector, as well as Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker, on their relatively low valuations.
Citigroup has a target price of NT$148.00 on Hon Hai.
The brokerage has removed smartphone manufacturer HTC Corp (宏達電) from its top “buy” list as the stock appeared expensive after a recent strong showing.
The brokerage added specialty steelmaker Gloria Material Technology (榮剛材料) and aluminum and magnesium products provider Catcher Technology (可成科技) to its top “buy” list.
Among its top “sell” stocks are IC designer MediaTek Inc (聯發科), PC vendor Acer Inc (宏碁) and touch-panel maker Young Fast Optoelectronics Co (洋華).