Although the government has downgraded its forecast for this year’s GDP growth to below 2 percent, market analysts said on Saturday that they remain upbeat about the performance of the local bourse, confident that the economy will pick up next year.
They said corporate earnings will continue to grow next year, which is expected to pave the way for local share prices to move higher.
Before the Directorate General of Budget, Accounting and Statistics (DGBAS) announced an update of its GDP growth prediction on Friday, the market had widely expected a downgrade to a growth level of below 2 percent, analysts said.
Despite the downgraded expectations, the TAIEX on Friday posted gains for the sixth consecutive session. In the past six sessions, the local bourse rose 307.38 points or almost 3.8 percent to close 8,406.83 points on Friday.
Wu Wen-tung (吳文通), an investment chief of Capital Investment Trust Corp (群益投信), said he has faith that the economy will improve next year, while listed companies are expected to benefit from the uptrend in terms of profitability.
The DGBAS on Friday downgraded its GDP growth target to 1.74 percent from a previous estimate of a 2.31 percent increase made in August, citing slower exports and weaker investment and consumption.
It expects the economy to grow 2.59 percent with improving exports next year. It had earlier estimated a 3.37 percent increase.
Wu said that as the local bourse is expected to continue an uptrend, he prefers select stocks including biotech, electronics for car use, cloud-based technology and Apple Inc’s iTV related businesses, as these stocks’ valuations are relatively low.
Liu Hsin-tang, a fund manager of the Yuanta Fund 2001, said that as the local stock market remains awash in liquidity, the TAIEX is likely to challenge 9,000 points.
Liu said that because the price-to-book value ratio of the local bourse currently stands at only 1.7, many local shares are cheap and attractive to many bargain hunters.