Emerging markets are expected to grow strongly next year, but inflation and the US-China trade dispute could slow their momentum, HSBC Global Asset Management Ltd said yesterday.
HSBC plans to slightly underweight Taiwanese stocks on expectations of slower growth compared with 12 months ago as they are affected by their foreign clients’ decreasing profits, head of equities Nick Timberlake said at a media briefing in Taipei.
“We see some headwinds for some companies here,” Timberlake said, adding that his equity team likes a lot of Taiwanese companies, but has to be cautious because their valuations are quite high.
While the team is still interested in adding individual stocks, it would wait until the second quarter of next year, when Taiwanese companies’ valuations and fundamentals are expected to improve to decide whether to add the Taiwanese market, he said, citing as an example several semiconductor companies that are not at their best now.
Emerging markets are expected to see their earnings per share (EPS) grow 14.5 percent this year and 11.8 percent next year, with all sectors expanding by double digits except for the energy sector, which has jumped more than 30 percent last year and this year, he said.
Emerging market equities continue to look attractive relative to history, with returns on equity reaching 13 percent in September, while emerging markets equity funds have experienced a net inflow of US$31 billion this year, he said.
Given strong growth in GDP and EPS, alongside positive valuations, the team has an optimistic view on emerging markets next year, he said.
However, risks exist, such as the US’ trade policies, a robust US dollar, capital repatriation, faster-than-expected exit from quantitative easing, unorthodox policy responses to external challenges by populist governments, China growth slippage, geopolitical shocks, as well as unexpected swings in commodities, HSBC said.
The team deems inflation the biggest risk, but “so far, it is unlikely to happen,” he said.
The team is monitoring the US-China trade dispute, which also negatively affects Russia and Brazil, he said.
However, compared with the trade dispute, a slowing Chinese economy and deleveraging would affect the global economy more, he said.
NOTABLE SHIFT: By 2030, 50% of all laptops would be assembled in Southeast Asia, while Taiwan would still mostly focus on research and development, a report said Global laptop and desktop computer supply chains are expected to shift significantly away from China in the next 10 years, a Market Intelligence & Consulting Institute (MIC, 產業情報研究所) report said. By 2030, only 40 percent of global laptop production would remain in China, said the report, which was released on Thursday. “The reshuffling of the global supply chain will be one of the most important trends in the next 10 years,” the institute said in the report. “In the long run, key component makers will follow laptop assemblers in moving out of China.” The Taipei-based institute predicted most key component makers
Merck Group Taiwan yesterday said that it plans to invest substantially on expanding its fab in Kaohsiung’s Lujhu District (路竹) to better serve its local customers, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電). The company said it plans to expand its production space by 50 percent in the next five years and its workforce by about 40 percent, Merck Group Taiwan managing director Dick Hsieh (謝志宏) told a media briefing in Taipei. Hsieh declined to disclose investment details, but said that the latest investment would exceed the total amount Merck has invested in Taiwan over the past few years. Those investments would be
Yageo Corp (國巨), the world’s third-largest supplier of multilayer ceramic capacitors, has formed a strategic alliance with Hon Hai Precision Industry Co (鴻海精密) to develop key electronic components for electric vehicles and digital healthcare, it said yesterday. The alliance is to help Yageo boost its revenue from high-end components for vehicles and industrial, medical and aerospace devices, as well as those used in 5G and Internet-of-Things devices, the company said. The companies signed the strategic alliance agreement at Yageo’s headquarters in New Taipei City’s Sindian District (新店). Their cooperation is to start this quarter, the companies said in a joint statement. “Through the cooperation
INVEST IN TAIWAN: A metal components casting firm and the world’s largest maker of aluminum bicycle rims also obtained approvals to join the program Solar Applied Materials Technology Co (SOLAR, 光洋應用材料), a part of Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) “green supply chain,” has pledged to invest NT$1 billion (US$34.1 million) to build a new plant at the Tainan Technology Industrial Park (台南科技工業區), the Ministry of Economic Affairs said yesterday. SOLAR has been collaborating with TSMC to extract precious metals from waste and reuse them as “sputtering target” material in high-end semiconductor manufacturing, a TSMC press release issued in May said. Established in 1978, SOLAR also offers key materials and integrated services to customers in the optoelectronics, information and communications technology, petrochemicals and consumer electronics industries,