Tue, Jan 08, 2019 - Page 12 News List

HSBC cautions investors as handset sales remain weak

By Kao Shih-ching  /  Staff reporter

HSBC Bank (Taiwan) Ltd (匯豐台灣商銀) yesterday said that Taiwanese equities could see volatility this year and investors should be cautious about smartphone hardware makers, as many of them might cut revenue forecasts amid waning handset sales.

The game changer for the technology sector would be the launch of new smartphone models in September, HSBC Private Banking chief market strategist for Asia Fan Cheuk Wan (范卓雲) said at a news conference in Taipei.

Facing headwinds, listed companies on the local bourse are expected to see their earnings grow just 2.6 percent this year, compared with average growth of 10 percent in Asia, Fan said, citing data from global index provider MSCI Inc.

Declining to say whether the bank overweighs local shares, Fan said that investors need not be too pessimistic, but should focus on companies with high profit margins, strong free cash flow, solid balance sheets and high earnings.

The TAIEX yesterday rose 2.21 percent to 9,590.3 points in its first daily advance since the year began, Taiwan Stock Exchange (TWSE) data showed.

Reversing last week’s selling spree, foreign institutional investors bought a net NT$8.23 billion (US$267.1 million) in local shares, the data showed.

Among Asian equity markets, the bank is overweighing China, Singapore and India, where earnings growth among companies this year is expected to reach 14 percent, 6 to 7 percent and more than 20 percent respectively, Fan said, citing MSCI data.

Although Chinese shares dropped significantly last year, they are expected to advance and stabilize this year, buoyed by a reduction in corporate taxes over the next 12 months, an acceleration in structural reforms and a slowdown in financial deleveraging by the government, Fan said.

Asked about trade tensions, Fan said that the US and China are expected to reach some agreements during a planned round of talks in Beijing, as companies in both countries have suffered from the spat.

“We do not think the trade war will become full-blown,” she said.

Overall, a possible slowing in the pace of US interest rate increases, a devaluation of the US dollar and China’s fiscal stimulus package could offer positive tailwinds for emerging markets and Asian assets this year, HSBC said.

Global equity markets are expected to see earnings increase 10 percent, it added.

HSBC forecast that the US Federal Reserve would raise policy rates by 25 basis points in March and June, followed by a pause before an interest rate cut in September 2020, while the 10-year US Treasury yield would stay at 2.5 percent for this year and next.

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