Tue, Mar 19, 2019 - Page 11 News List

HSBC to raise weighting of Taiwanese tech stocks

A GREAT VALUE:Taiwanese tech firms invest so much capital and effort into upgrades that it is difficult for new competitors to catch up to them, an HSBC executive said

By Kao Shih-ching  /  Staff reporter

Despite a correction in the global technology sector, HSBC Global Asset Management Ltd yesterday said it plans to raise the weighting of Taiwanese technology stocks in its portfolio.

“We like the Taiwanese tech sector and we own equities of four or five tech companies in our portfolio,” HSBC Asian and Indian equities head Sanjiv Duggal said at a media briefing in Taipei.

Numerous Taiwanese tech companies have faced inventory issues, with some of them reporting declining sales from November last year, while others in the component and memory sectors saw falling product prices, Duggal said.

The market correction in the technology sector is expected to have a temporary impact on some Taiwanese firms, and the second quarter would show whether the inventory problem has been resolved, Duggal said.

HSBC would increase the weighting of Taiwanese tech stocks in their portfolio because of their historically cheap prices and attractive values, he said.

The firms are also worth investing in because they are leaders in their industries, he added.

“These firms invest so much capital and effort into upgrades that it is difficult for new competitors to catch up to them, especially in industries that are dominated by only two or three players,” Duggal said, without naming any companies due to regulatory restrictions.

Taiwan Semiconductor Manufacturing Co (台積電), the world’s biggest contract chipmaker, is one of the top 10 firms represented in HSBC’s portfolio, with a weighting of 4.9 percent, HSBC data showed.

However, HSBC expects to reduce the weighting of Taiwanese equities in other sectors, such as the consumer staple and finance sectors, on expectations of slower growth, causing the overall weighting of Taiwanese firms in the portfolio to drop slightly.

The Taiwanese market’s average earnings per share this year is forecast to remain unchanged from last year’s 1.1 percent growth, Duggal said

By contrast, HSBC said it expects to raise the weighting of equities from Hong Kong, India, China, Thailand and Indonesia because of a robust growth outlook for those markets.

Even though elections in India, Indonesia, Thailand and the Philippines this year might generate uncertainty, strong domestic consumption and fiscal policies are expected to support economic growth in the region, HSBC added.

While concern lingers about whether the US Federal Reserve will raise interest rates, investors should worry less about central banks in emerging markets, as policies there are expected to remain dovish, Duggal said, adding that the Reserve Bank of India is expected to continue lowering rates after a cut of 25 basis points in the benchmark repo rate last month.

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