Credit Suisse Group AG projected that the TAIEX would rise to 9,700 points next year, as listed companies see improvements in their bottom lines amid a domestic and global economic recovery.
“We believe Taiwan’s equity market will see better earnings growth of 15 percent in 2017 versus the modest decline in 2016,” Credit Suisse said in a report issued on Wednesday last week.
“The better growth will be driven by better global growth and exports, lowered base and earnings expectations after cuts in 2016, and a likely stronger Apple [Inc] product cycle in 2017,” it added.
On Friday last week, the TAIEX rose 0.18 percent to 9,392.68 points. Since the beginning of the year, the index has gained 12.65 percent on the back of strong foreign institutional buying in large-cap stocks such as Taiwan Semiconductor Manufacturing Co (台積電), which supplies chips for Apple’s iPhone 7 series.
Credit Suisse said it set the 9,700 target on an average price-to-book ratio of 1.7 for Taiwanese stocks, compared with a 10-year average of 1.6, with the market’s return on equity likely to improve to 13 percent next year from 11.6 percent this year.
In the report, Credit Suisse said that it favors high-tech stocks over non-high-tech equities, as the sector is expected to post a 19 percent annual increase in profits next year, compared with an expected rise of about 6 percent in the non-high-tech sector.
The report’s prediction of double-digit growth in high-tech-sector profits was based on a relatively low comparison base this year.
In addition, “Apple concept stocks” will continue to benefit from the US consumer electronics giant’s launch of new gadgets next year, it said.
Macquarie Capital Securities Ltd last week set its TAIEX target at 9,500 points for next year, driven by anticipated gains for memory, semiconductor, automation, automative electronics, financial and some defensive non-tech stocks.
“We expect tech to be driven by semiconductor growth acceleration (after two flattish years) and a weaker NT dollar (helping all exporters),” Macquarie said in a research note on Monday last week.
The brokerage said Taiwanese shares would be traded at 1.7 times their price-to-book ratio or at 14 times price-to-earnings ratio next year.
SinoPac Financial Holdings Co (永豐金控) has projected that the TAIEX would likely peak at 10,000 points next year, on expectations that average book value per share would rise from 1.46 times to 1.74 times, according to the company’s forecast made at a news conference on Thursday last week.
Morgan Stanley last month set a TAIEX target of 9,600 points for next year, while raising Taiwan’s GDP growth forecast from 0.4 percent this year and 1 percent next year to 1.2 percent and 1.6 percent respectively.
Earnings among local businesses are projected to see a 13.3 percent annual rise next year, compared with a 4.9 percent slump this year, Morgan Stanley said in a report issued on Nov. 28.
Additional reporting by Ted Chen
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