Foreign and domestic brokerages have trimmed their TAIEX forecasts for this year, as the global economy and policy uncertainty might constrain corporate earnings in the first half of the year.
All described the landslide victory by the Democratic Progressive Party as in line with expectations, but said they believe the four-month transition would extend policy uncertainties.
“We are cautious on Taiwan equities due to lower demand from China and concerns about the competitiveness of local exporters” because the nation fails to engage in multinational trade pacts, HSBC Securities said in a report that assigned an “underweight” rating for local shares.
It expects the market to refocus on global economic developments and industry fundamentals in the coming six to nine months, when Taiwan may come out of technical recession with modest growth, thanks partly to a low base of comparison from last year.
It will take time for the new administration to implement policy initiatives because president-elect Tsai Ing-wen (蔡英文) will not assume office until May 20, HSBC said.
Hong Kong-based HSBC economist John Zhu (朱日平) said Taiwan’s GDP may grow 2 percent this year and there is little room for fiscal policy expansion if exports continue to disappoint.
Taipei-based Yuanta Securities Investment Consulting Co (元大投顧) lowered its TAIEX target from 9,250 to 8,500 on macro-economic concerns. The revision has more to do with Chinese yuan’s sharp depreciation, which may hurt the financial sector, it said in a report.
The overall banking industry losses from target redemption forwards sales could reach NT$72.8 billion (US$2.15 billion), erasing 23 percent of the industry’s earnings estimated for this year, it said.
Credit Suisse said the Taiwan market may see an earnings decline of between 10 percent and 12 percent in the first half, with the export-reliant economy remaining dragged by poor order visibility.
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