The TAIEX is expected to bottom out next quarter amid the nation’s economic slowdown and the European debt crisis, providing a good entry level for equity investors, analysts said yesterday.
The analysts’ optimism is built on the expectation that the European debt problem could improve from the first half of next year as the European Central Bank plans to inject more low-interest capital into debt-ridden nations in February following a recent 489 billion euro (US$640 billion) loan to eurozone banks.
“The biggest challenge for the local stock market is the uncertainty over global financial markets,” Alex Huang (黃國偉), Mega International Investment Services Corp (兆豐國際投顧), said at a forum arranged by Taiwan Stock Exchange Corp (TWSE, 台灣證交所).
“And the European Central Bank’s capital offering will greatly help ease the risk of default on debt in some eurozone countries, Italy primarily,” Huang said.
At home, Taiwan’s GDP growth is also expected to slow to 2.67 percent annually next quarter and to recover gradually to peak at 5.31 percent in the fourth quarter, bringing the nation’s GDP growth to 4.13 percent for next year, based on a forecast by the Directorate-General of Budget, Accounting and Statistics (DGBAS).
The nation’s economy would grow 4.51 percent year-on-year for this year, DGBAS said.
“As the uncertainty abroad and at home gradually clears up, there is a high possibility that the stock market will recover in the second half of next year after hitting a trough in the first quarter,” Huang said.
Financial stocks and electronics makers, especially components suppliers for Apple Inc’s products, which are trading well below historical price-earnings ratios, would be good investment targets in the first half of next year before their share prices rebound in the second half, Huang said.
The price-to-earning ratio of companies traded on the main bourse has dropped to 15.29, the lowest level in three years, a level that should encourage investment, a stock exchange official said yesterday.
“The 6,600-point mark will be a good entry level,” Huang said.
The benchmark TAIEX fell for the third consecutive trading session yesterday to close at 7,056.67, with turnover shrinking further to NT$56.58 billion (US$1.87 billion), compared with NT$59.39 billion on Tuesday.
Chou Kang-chi (周康記), president of the nation’s fourth-largest brokerage by market share, Capital Securities Corp (群益證券), also said he was not pessimistic about the local stock market.
“Instead, I think it is a good time for investors to buy shares as a lot of stocks are trading well below reasonable levels,” Chou said at the forum.
However, as local brokerages are suffering from reduced turnover, Chou urged the financial regulator to loosen trading rules to boost trading volume.
One of Chou’s suggestions is to allow Chinese investors to buy shares. However, TWSE chairman Schive Chi (薛琦) did not directly respond to Chou’s call, rather he offered a solution to increase the market value of the stock market, which stood at NT$19.28 trillion as of the end of last week.
Schive called on the government to allow state-run companies such as Taiwan Power Co (台電), CPC Corp, Taiwan (台灣中油), and the Taiwan Railway Administration (台鐵) to list on the local bourse.
Schive said about 41 overseas companies were lining up to list on the local bourse over the next year or two, including some from Japan, after 12 foreign companies launched their initial public offerings this year and nine companies issued Taiwan Depositary Receipts, he added.