The Taiwan market is unlikely to post earnings growth this year since the communications and chemical sectors are dragging down overall performance, US bank Citigroup Inc said recently in a note to clients.
With more than half of all tech companies having reported results for the second quarter, Citi has forecast the overall earnings of the Taiwan market to drop 0.5 percent this year.
This follows a decline in earnings in the Taiwan market by 28.2 percent last year, according to Citi, as the market’s earnings fell 35 percent from its 2007 peak.
The single largest cuts in Citi’s full-year earnings forecast for this year were for contract electronics maker Hon Hai Precision Industry Co (鴻海精密) and smartphone vendor HTC Corp (宏達電), both down 40 percent.
Other big cuts in the notebook sector were Compal Electronics Inc (仁寶電腦) and Quanta Computer Inc (廣達電腦), for which Citi revised down its full-year earnings estimates by 31 percent and 14 percent respectively.
The chemical sector was the second-largest driver to Citi’s aggregate earnings cuts during the past month. The US bank slashed this year’s earnings forecast for Formosa Petrochemical Corp (台塑石化) by 54 percent and for the chemical sector by 37 percent.
“The cuts in the chemical sector appear to be more cyclical, while cuts to tech appear more structural,” Peter Kurz, head of Taiwan research at Citigroup’s securities’ arm, said in the note.
“The good news is that most of the big adjustments have now been made, at least for this quarter,” he wrote.
Citi, the third-largest US bank, has reduced the dividend yield for the Taiwan market for this year from 3.7 percent to 3.2 percent, and for next year from 4.4 percent to 4.0 percent.
Following these adjustments, Citi announced its new target prices of NT$115 (US$3.83) for Hon Hai, NT$192 for HTC, NT$28 for Compal, NT$68 for Quanta and NT$75 for Formosa Petrochemical.