Credit Suisse Group AG yesterday lowered its year-end forecast for the Taiwanese stock exchange’s benchmark index, the TAIEX, from 10,000 to 8,500 points to reflect lower earning projections by local companies.
With lower earning forecasts spreading from tech to non-tech sectors, due in part to slower growth in China, there is an increasing possibility that earnings on the Taiwanese market could decline next year, after recording cumulative growth of more than 80 percent over the past three years, the bank said.
“Meanwhile, we believe tech earnings are likely to see some relief in the fourth quarter of this year, driven strongly by the currency tailwind,” Credit Suisse Taiwan market strategist Chung Hsu (許忠維).
“However, we expect non-tech earnings to come under pressure, with petrochemical companies suffering more inventory losses as a result of a further drops in oil prices,” Hsu wrote in a research note. He projected that raw material suppliers would also be affected by weak demand from China and that the financial sector would face headwinds as a result of a weaker capital market.
Taiwan’s tech sector is likely to fare better than the non-tech industry toward the end of the year due to a favorable foreign exchange rate, PC inventory restocking in the second half of the year and the launch of iPhone 6S late in the third quarter, Hsu said.
As a result, Taiwan’s tech earnings are likely to grow 9.8 percent next year, while non-tech earnings, including the financial sector, are expected to drop 6.6 percent, he said.
The TAIEX closed down 14.04 points, or 0.18 percent, at 7,986.56 yesterday on a turnover of NT$67.69 billion (US$2.06 billion), the weakest turnover since Feb. 9.
Tracking weakness in Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) shares, the most heavily weighted stock in the local market, the bourse failed to stay above the 8,000-point mark at the end of the session after the Dow Jones Industrial Average plummeted 272.38 points on Friday.
Smartphone camera lens supplier Largan Precision Co (大立光), which is among the so-called “Apple concept” stocks, closed down 3.52 percent after it announced an increase of 1 percent in consolidated sales last month from a month earlier, which was lower than market expectations.
Metal casing maker Catcher Technology Co (可成), which is another supplier for Apple Inc, rose NT$3.5 to close at NT$314.00 due to its strong sales last month.
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