Less vigorous growth is expected in the TAIEX next year, with the benchmark index likely to be capped at 8,300 points because of a new tax on capital gains and an additional health insurance payment from dividend gains, SinoPac Securities Investment Service (永豐金投顧) said yesterday.
SinoPac had previously estimated the index would bounce back to between 7,000 and 8,800 next year, led by traditional industries, Jack Huang (黃蔭基), head of SinoPac’s research division, said during a press conference.
That is compared with a forecast range of 7,100 to 7,800 made in the second half of this year, Huang said.
The downward revision “is primarily because of the planned implementation of a capital gain tax, which includes tax on stock gains. The index will be under pressure when it approaches the 8,500 level,” Huang said.
The 8,500 mark has been set by the government as the point at which stock investors would have to pay 20 percent tax on their stock transactions in the first two years after the capital gains tax takes effect next year.
The transaction amount will be given a discount of 0.002 percent when the TAIEX reaches between 8,500 and 9,499.99. The discount will go up to 0.06 percent if the index rises to more than 10,500.
SinoPac’s forecast came a day after Daiwa Capital Markets raised its TAIEX outlook from 7,000 to 7,800 points over the next six months after the local stock market out-performed its Asian peers in terms of returns by 5.8 percent last month.
Daiwa’s Taiwan equity research head, Mark Chang (張靖坤), said in a note that the government’s policies, aggressive share buybacks by local firms and an increase in market liquidity were the reason behind the upgrade.
For both SinoPac and Daiwa, the rebound on the stock market has been fueled by improvement in the nation’s economic fundamentals. The TAIEX had risen in 10 consecutive sessions prior to yesterday, which saw the index slip 0.34 percent to 7,623.36.
Taiwan’s economic growth would be 3.36 percent annually next year, from 1.28 percent estimated by SinoPac, in line with economic recovery in China and the eurozone, which are forecast to expand by an annual rate of 8.3 percent and 0.2 percent, from zero and 7.7 percent this year, the brokerage said.
The US will escape its “fiscal cliff” and increase its GDP by 1.8 percent annually next year, according to SinoPac’s forecast.
“If the global economy recovers as we expected … That will constitute a favorable environment for risky assets as long as there is ample liquidity on the market, while bonds will lose appeal as the need to hedge risk will diminish,” said Sharon Lin (林秀貞), a vice president of SinoPac’s research division.
SinoPac said it would advise clients to increase holding of equities to at least 60 percent of their investment portfolios next year, compared with 50 percent this year.
For investors interested in commodities, Huang said SinoPac does not plan to roll out new investment tools on gold next year because the return would shrink to 7 percent, down from more than 20 percent in 2008 and 2009.
The global gold price is expected to be about US$1,800 an ounce. The gold price closed at US$1,715.2 per ounce in New York trading on Friday last week.