With the TAIEX having risen 6 percent since the beginning of the year, equity strategists at HSBC Securities Taiwan Corp predict that technology shares are likely to continue outperforming their non-technology peers in the second half of the year.
In their latest market strategy report, HSBC analysts Jenny Lai (賴惠娟) and Bruce Warden said that local technology shares are set to benefit from the new product cycle in the coming months.
The cycle is expected to include Apple Inc’s latest iPhone model, new hybrid devices from computer companies and telecom vendors’ launches of smartphones equipped with 4G, or long-term evolution, wireless technology, HSBC said on Friday.
The tech sector is also set to benefit from the stabilization of sectors previously hit by weak demand, including the PC industry, and price hikes in other sectors, such as memory chips and flat panels, the brokerage said.
Analysts polled by Bloomberg expect technology companies to see their combined revenues for the second half of the year increase by 22 percent from the first half, which HSBC said would constitute “more aggressive” growth than average since the global financial crisis erupted in 2009.
Investors should also pay attention to non-technology shares of firms that are to launch new products and unveil expansion plans, but they must be cautious about financial and property stocks ahead of the seven-in-one elections for municipalities, counties and townships in November, as the polls could spur the government to introduce policies emphasizing social fairness over economic growth, HSBC said.
“The use of policy tools — especially by increasing taxes targeting financial institutions and property owners — could hurt sentiment in the financial and property sectors,” the brokerage said.
In addition, if the Legislative Yuan does not approve the cross-strait service trade agreement, the financial industry would be denied a new sector-wide catalyst, it added.