A European brokerage has sharply cut its target for the TAIEX in reaction to the nation’s lower-than-expected GDP growth in the second quarter.
The brokerage, which asked not to be named, has trimmed its target for the index to 9,180 points from an earlier forecast of 9,900 points, citing concerns over outbound shipments of the bellwether electronics sector.
On Friday, the Directorate-General of Budget, Accounting and Statistics (DGBAS) reported that Taiwan’s GDP rose just 0.64 percent in the first quarter, lagging far behind the DGBAS’ earlier estimate of 3.05 percent growth.
The government agency said that the disappointing second quarter largely resulted from worse-than-expected exports due to persistent weak global demand. In the April-to-June period, Taiwan’s merchandise and service exports fell 1.3 percent year-on-year, compared with an earlier forecast of 3.27 percent growth.
The weighted index on the Taiwan Stock Exchange closed down 0.16 percent to 8,665.34 points on Friday after bargain hunting in the late trading session lifted select large-cap stocks, helping the index recoup earlier losses, dealers said.
Despite the small gains in share prices in the latest session, sentiment toward the economy remained cautious in the wake of second-quarter GDP figures, they said.
The brokerage said that bottom lines in the electronics sector this year could be eroded due to prolonged inventory adjustments, and such weakness in profitability could continue into next year.
A move by US consumer electronics giant Apple Inc, which has large orders with Taiwanese suppliers, to give a lower-than-expected guidance for the three months to September bodes ill for Taiwan’s outbound shipments in the quarter, the brokerage said.
At an investor conference last month, Apple forecast that its sales in the current quarter would range between US$49 billion and US$51 billion, less than an earlier market forecast of US$51.1 billion.
The brokerage said fears have escalated that global demand in the fourth quarter and even in the first quarter of next year would also disappoint the market and shares in Taiwan could face downside risks.
While it has cut its target for the TAIEX, the brokerage is recommending five stocks to investors on the basis of their sound fundamentals or attractive prices.
The five are food maker Uni-President Enterprises Corp (統一企業), telecom operator Far EasTone Telecommunications Co (遠傳電信), contract chipmaker Taiwan Semiconductor Manufacturing Co (台積電), metal casing supplier Catcher Technology Co (可成), and E.Sun Financial Holding Co (玉山金控).
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