Taiwanese companies with high European sales contributions or earnings that are linked to the movement of the yen are expected to be most affected by the fallout from Britain’s vote to leave the EU, Yuanta Securities Investment Consulting Co (元大投顧) said.
“Brexit” has unleashed a new wave of uncertainty for global markets, leading to expectations of heightened foreign-exchange volatility as global funds take shelter in defensive options such as the yen and the US dollar, the brokerage said in a report on Friday.
A stronger yen is expected to bring increased cost constraints for Taiwanese dealers of, and suppliers to, Japanese brands, and local companies including Nissan Motor Co (裕隆日產) and Toyota and Lexus distributor Hotai Motor Co (和泰車) might be compelled to increase prices, which could hamper their sales, the report said.
However, local companies that compete against Japanese rivals are set to benefit from a pricing advantage, including makers of industrial machinery, printed circuit boards, and passive electronic components, as well as mobile phone camera supplier Largan Precision Co (大立光) and contact lens manufacturer St Shine Optical Co Ltd (精華光學).
As economic growth prospects turn gloomy, consumers in the EU might become cautious about spending, which could weaken the sales of Taiwanese companies heavily reliant on the European markets, the report said.
Britain’s economy is set to grow by 0.5 percent annually this year, decelerating from last year’s 2.2 percent expansion, Hong Kong-based JPMorgan Asset Management forecast.
Hota Industrial Manufacturing Co (和大工業), which makes gears and shafts for automakers, has a significant 65 percent sales contribution from the EU, Yuanta data showed.
Bicycle maker Merida Industry Co (美利達) has a 40 percent sales dependency on the EU, compared to its peer Giant Manufacturing Co Ltd’s (巨大機械) 27 percent.
haLocal PC makers Asustek Computer Inc (華碩) and Acer Inc (宏碁) generate 35 percent and 37 percent of their sales from the continent respectively, the data showed.
While a risk averse investment environment does not bode well for emerging markets or perceived higher risk assets such as Asian equities, the majority of Asian holdings have a domestic focus — with most companies earning about 60 percent of revenue and profits from their local regions — Fidelity International Asia Pacific ex Japan investment chief Tim Orchard said.
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