Despite volatility in the global markets, particularly on Wall Street, Taiwan’s equity market is expected to be resilient, due to sound economic fundamentals, market analysts said on Saturday.
It is inevitable that the local equity market will be choppy in the short term amid worries over a global trade war, but in the long term, it is expected to return to an upward trend due to an economic recovery, Allianz Global Investors Taiwan Technology Fund manager Peter Liao (廖哲宏) said.
The TAIEX last week fell 204.37 points, or 1.85 percent, to close at 10,823.33 on Friday, when the index fell 182.51 points, or 1.66 percent.
US President Donald Trump on Thursday signed an order imposing tariffs on US$60 billion worth of Chinese imports. China hit back with tariffs of its own on 128 US products, valued at US$3 billion.
The market capitalization of the local main board fell NT$607.50 billion (US$20.83 billion), or 1.84 percent, from a week earlier to NT$32.46 trillion, with foreign institutional investors selling a net NT$1.29 billion worth of shares over the week, according to the Taiwan Stock Exchange (TWSE).
However, Taipei’s losses on Friday were not as steep as Japan’s 4.51 percent slump, Shanghai’s 3.39 percent dive, Seoul’s 3.18 percent drop and Hong Kong’s 2.45 percent decline, indicating that the Taiwanese market is resilient compared with its regional counterparts.
Taiwanese firms are expected to see their profitability improve this year as the economy has been on the way to recovery, while a gradual increase in key interest rates by the US Federal Reserve is expected to reduce the effects on the global economy from a rate hike cycle, Liao said.
The Directorate-General of Budget, Accounting and Statistics last month raised its forecast for Taiwan’s GDP growth this year to 2.42 percent, from its previous estimate of from 2.29 percent, due to solid global demand.
After Friday’s losses, the local main board is expected to enter into consolidation mode in the short term to digest the rising pressure caused by global volatility, Liao said.
Liao prefers stocks related to emerging technologies, such as artificial intelligence, 5G, electric vehicles and the Internet of Things, he said.
Jih Sun Optimization Fund manager Yang Yuan-han (楊遠瀚) agreed, saying that uncertainty posed by a possible trade war between the US and China could place more downward pressure on equities worldwide.
However, Washington gave 60 days to China to negotiate on the impassive tariffs, so there is a chance for both sides to avoid a trade war, Yang said.
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