In light of lingering uncertainties caused by the US Federal Reserve’s anticipated interest rate hike, Citicorp Securities Investment Consulting Inc (花旗投顧) last week said that while there are no standout fourth-quarter investment destinations, global funds would likely flow into the developed markets of the US, Europe and Japan.
The Fed’s ambiguity on raising interest rates is widely believed to be an indication that the pace of economic growth in the US is slower than expected, and has since sent investment sentiment tipping toward pessimism, Citicorp Securities vice president Spencer Wang (王進彰) told a media briefing on Wednesday.
“The Fed will likely delay planned rate hikes until the first quarter of next year due to the lack of growth momentum in US private consumption and lending,” Wang said. “However, on the other hand, pervading cautionary sentiment have prevented US stocks from being overvalued.”
Wang said the US economy looks healthy and the Fed’s rate hike might be limited to 25 basis points.
US household debt as a proportion of disposable income has improved to 107 percent as of the end of last year, from a high of 135 percent in 2007, paving the way for a rebound in private consumption.
In addition, among US businesses, loan interest payments as a proportion of earnings improved to 15 percent last year compared with 18 percent in 2008, indicating lower default risks across the private sector, according to Citigroup.
Apart from the US market, Wang also holds a positive outlook on eurozone stocks due to low inflationary pressure and improving shareholders’ equity, as well as on equities in Japan, which he attributed to recent deregulations on equity investment by Japan’s post office and pension funds, in addition to continued stimulus policies.
Meanwhile, Wang recommended investors look to improve valuation of H-shares — equities of companies incorporated in China that are traded on the Hong Kong Stock Exchange, and other yuan-linked products to cheap valuation.
He said prices of Chinese shares have been pushed lower by tumbling Chinese real-estate stocks, as compared to a decade ago, while the price-earnings ratio of domestically-listed Chinese stocks have tumbled from 11.7 times to 8.4 times, and the ratio for overseas-listed Chinese stocks fell to 11.7 times from 14.7 times.
As Beijing steps up pace in the privatization of state-run enterprises and assets, the private sector is expected to be stimulated, allowing improvement in investment prospects in local equity markets, Wang said.
He shrugged off concerns that China’s slowing economy would have a negative impact on the return on equity investment, citing precedents in Japan.
“Despite an anemic 0.9 percent GDP growth rate between 1998 and 2010, Japan’s markets still yielded average annual returns of 17 percent during the period,” Wang said.
He advised investors to invest yuan-linked financial instruments that bet on business growth, because foreign exchange derivatives trading often result in losses for investors, based on his observations.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is