Taiwan’s stock market has healthy prospects, with the TAIEX likely to hit 10,000 points toward the end of the year as the export-reliant economy is likely to benefit from a stable recovery in the US, Credit Suisse Securities said yesterday.
Since the beginning of the year, Taiwan has recorded total net foreign buying of US$13 billion, the highest net fund inflow since 2009, accounting for nearly 40 percent of the net fund inflow to emerging Asian markets excluding China, the Swiss brokerage said.
The main index closed down 0.82 percent at 9,357.61 points yesterday on light turnover of NTT$77.59 billion (US$2.59 billion), Taiwan Stock Exchange data showed.
“We expect listed firms to register a 26 percent earnings growth this year,” Credit Suisse analyst Chung Hsu (許忠維) told a media briefing on the sidelines of its 15th Asian Technology Conference in Taipei.
The three-day conference, which ends tomorrow, has invited more than 110 Taiwanese companies from both technology and non-technology sectors to present their latest business forecasts to investors.
High savings and a current account surplus — more than 10 percent of GDP — should help the local bourse buffer the forthcoming exit of the US Federal Reserve’s quantitative easing, Hsu said.
The earnings of Taiwan’s upstream tech companies are highly correlated to US economic data, notably the purchasing managers’ index (PMI), Hsu said, adding that the US’ PMI is picking up.
Local downstream technology firms have been benefiting from a strong product cycle and a stronger US dollar, he said.
Many Taiwanese manufacturers are in the supply chain of global technology giants, including Apple Inc, which unveiled its new-generation products overnight.
Financial companies will continue to receive a boost from foreign currency loan growth and better fees and lower credit costs, Hsu said.
Almost all financial service providers have logged a hefty increase in wealth management product sales this year from the year-ago levels as a recovering economy raises risk appetite, he said.
Credit Suisse expects a better balance between tech and non-tech sectors in the second half of the year.
Taipei-based Randy Abrams, the brokerage’s head research analyst, said he expected the semiconductor industry would see a soft landing next quarter.
The seasonal volatility in the fourth quarter is expected to be milder this year than prior years because Apple provides a near-term cushion, Abrams said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, is likely shifting from a growth to value story, as earnings growth slows into the low season, he said.
While tight capacity helps TSMC to maintain firm prices, other upstream companies in the semiconductor industry are likely to see their stock prices affected by an inventory correction soon, Abrams said.
TSMC may also face increasing competition from South Korean rival Samsung Electronics Co in the second half of next year, he said.
Growth in the communications sector should moderate next year after low-end smartphones drive growth this year, he said, adding that wearable devices and the Internet of Things could be a potential new market for the sector.
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