Major foreign brokerage houses retained the view in their latest reports that the TAIEX could rally above the 8,000-point mark by the end of this year, assuming there is no major deterioration in the eurozone debt crisis and cross-strait relations after this month’s presidential election.
Deutsche Bank AG’s research team yesterday maintained its 8,150-point target for the nation’s benchmark index at the end of the year, 15 percent upside potential from the current level.
The TAIEX rose 29.59 points, or 0.42 percent, to close at 7,082.97 yesterday. Turnover remained relatively low ahead of the Jan. 14 presidential and legislative elections, even though the figure expanded to NT$75.26 billion (US$2.49 billion) from NT$63.65 billion in the previous session, Taiwan Stock Exchange data showed.
“When the election overhangs are removed and provided the results are deemed positive by the market, external factors and the economic cycle improve and market sentiment turns more bullish, we believe our target is achievable,” Deutsche Bank strategist Joelian Tseng (曾慧瓊) said in the report.
However, the brokerage house expects the typical “January effect” on the stock market to be delayed to next month, as investors may remain jittery before the presidential election, causing the Taiwanese bourse to underperform relative to the rest of the region.
Meanwhile, Deutsche Bank warned that the TAIEX could dip further toward 6,400 points over the near term if there are further complications in the economies of Europe, the US and China.
Bank of America Merrill Lynch, in its latest report issued on Tuesday, shared Deutsche Bank’s view by setting its year-end target for the TAIEX at 8,000 points, with no major deterioration in relations with China following the presidential election.
Katherine Hu (胡傳祥), a market analyst at Merrill Lynch Securities, said the brokerage house sees the performance of Taiwan’s stock market “as challenging, but not overly bearish” this year.
“Without doubt, 2012 will be another challenging year for the overall macroenvironment, given that Taiwan is vulnerable to the export cycle,” Hu said. “The stock market could remain volatile.”
Merrill Lynch recommended that investors stay defensive until macroeconomic data get close to the bottom.
The brokerage house also expects the market’s focus to shift in the second quarter to cross-strait talks, dividend yields and speculation on Chinese banks’ inbound equity participation in financial firms.
Separately, Nomura Holdings Inc said the benchmark index could rise to 8,200 points by the end of the year.
Despite that, Taiwan is a market that can easily overshoot in either direction because of the high concentration of manufacturing firms, but the TAIEX has not had two consecutive years of negative returns in three decades, Nomura strategist Jesse Wang (王嘉樞) said in a report issued on Tuesday.
“As such, we see a low likelihood of the TAIEX, one of the worst-performing markets in Asia in the past year, continuing its 2011 slump,” Wang said.
Nomura said the non-technology sector would remain the place to be in the first half of this year, with the technology sector starting to outperform when earnings forecasts stop being trimmed.