Barclays Capital said yesterday it had lowered its full-year target for the TAIEX by 9 percent to 8,000 points from 8,800 estimated previously, citing weak macroeconomic conditions at home and abroad.
“The flattening of the ECRI [Economic Cycle Research Institute] US weekly leading indicators, softer China growth and European uncertainty temper our positive outlook for the TAIEX,” Barclays equity researchers, led by Kent Chan (陳衛斌), said in a report. “In addition, our tech channel checks confirm incremental deterioration in orders.”
The Barclays’ downward adjustment came two weeks after UBS Securities lowered its full-year target for the TAIEX to 8,000 points from 8,550, and one week after CLSA Asia Pacific Markets cut its target to 7,350 points from 8,350 amid lingering concerns over the eurozone debt problems.
The TAIEX ended yesterday at 7,136 points, falling 1,008.04 points, or 12.38 percent, from this year’s closing high of 8,144.04 seen on March 2, amid worries about the debt crisis in Europe and a possible capital gains tax on securities investment in Taiwan, data from the Taiwan Stock Exchange (TWSE) showed.
Daily turnover hit a three-year low of NT$44.17 billion (US$1.49 billion) yesterday, compared with an average of NT$71.7 billion this month and NT$75.8 billion last month, data showed.
In the research report, Chan, head of Taiwan equities research at Barclays Capital, said the performance of the Taiwanese semiconductor and display sectors remained in line with the brokerage’s second-quarter expectations, despite relative weakness in the downstream sector, especially handsets.
While exports and tech shipments are expected to continue to ramp up through the third quarter from the second quarter, Chan said the first-half increase in semiconductor inventories did raise concerns, should global economic growth falter after the third quarter to drag down demand for tech products globally.
“We are underweight on semiconductors and display names. Should demand falter, our analysts expect PC and handset supply chain stocks will also face earnings risks,” the report said.
Despite its reduction in the TAIEX target, cross-strait relations remain stable and the market consensus about earnings revisions appears to be turning, Chan said.
Barclays remains upbeat about firms in select high-tech sectors that are expected to receive support in the third quarter following new product launches from Microsoft Corp’s Windows 8 operating system, Ultrabook computers and Apple Inc’s iPhone 5.
Barclays maintained its “overweight” recommendation on certain technology companies in the handsets/Apple supply chain and fabless semiconductor companies, as well as the telecommunications and banking sectors, because of their relatively low valuations following the recent sell-off.
“The TAIEX and the tech names are close to a bottom, and longer-term investors should begin to search out value. We recognize the need for confirmation of EU stabilization, however,” Chan wrote.