Thu, Feb 21, 2019 - Page 11 News List

Taiwan’s tech bounce unlikely to last: Goldman

Bloomberg

The strong performance of some technology stocks in Taiwan this year will not last, Goldman Sachs Group Inc said.

A combination of sluggish global growth in the first half of the year, a possible decline in tech earnings this year and high foreign investment in the sector all point to likely underperformance from Taiwanese technology companies, Goldman strategists led by Richard Tang (鄧啟志) wrote in a note on Monday.

They said the tech bounce appears to be part of the “laggard rotation occurring in the region,” which is unlikely to last.

“On a relative basis, we recommend investors to favor non-tech, and believe that any rotation into tech may not sustain as we do not see any solid fundamental arguments,” they said.

The TAIEX yesterday edged higher and has risen more than 5 percent this year, with the Electronic Parts/Components and Optoelectronic indices gaining the most among 28 industry groups.

That is a change from last year.

The non-tech sector has outperformed tech by 30 percent since late 2017, Goldman Sachs said.

Companies such as CTBC Financial Holding Co (中信金控) and Mega Financial Holding Co (兆豐金控) could outperform as valuations and positioning normalize, while investors should be “cautious” on firms like Nanya Technology Corp and Asustek Computer Inc, the analysts said.

They also recommended focusing on stocks with high dividends and low earnings volatility.

“Bottom line: We fade the tech bounce, and expect non-tech to maintain its leadership,” they said.

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