Tue, Jul 02, 2019 - Page 12 News List

Corporate earnings a concern, despite truce: report

By Kao Shih-ching  /  Staff reporter

Although the US and China have called a ceasefire on their trade dispute, concern over second-quarter earnings is expected to weigh on investor sentiment, Yuanta Securities Investment Consulting Co (元大投顧) said in a report released yesterday.

US President Donald Trump and Chinese President Xi Jinping’s (習近平) weekend talk at the G20 summit in Japan ended earlier than expected, but it could be interpreted as having gone smoothly, Yuanta analyst Vincent Chen (陳豊丰) said.

However, the two leaders only agreed to restart talks and suspend retaliatory moves, possibly avoiding any serious disaster, he said.

US companies could resume selling components to Huawei Technologies Co (華為), but the Chinese firm would not be removed from Washington’s entity list due to national security concerns, Chen said.

“Huawei is still not allowed to sell its communication equipment in the US,” Chen said, adding that sales of Huawei smartphones might be allowed as they have lower national security concerns.

The easing of the ban on Huawei could benefit several Taiwanese firms, such as Novatek Microelectronics Co (聯詠科技), JMC Electronics Co (易華電子), Largan Precision Co (大立光), LandMark Optoelectronics Corp (聯亞光電) and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), he said.

Market forecasts for TSMC’s full-year sales have been revised down over the past few months, but with the easing of the restrictions on Huawei, which accounts for about 10 percent of TSMC’s sales, the world’s biggest contract chipmaker could see an upward adjustment in sales, he said.

The positive sentiment sent the TAIEX up 1.53 percent yesterday to close at 10,895.46 points. Daily turnover jumped to NT$144.88 billion (US$4.67 billion) from an average of NT$100.9 billion last week.

Foreign institutional investors bought a net NT$7.23 billion in Taiwanese shares yesterday, Taiwan Stock Exchange data showed.

While the expanded turnover reflected investors’ willingness to chase prices, they need to be wary of second-quarter earnings because the results might turn out worse than expected, Chen said.

While investors were relieved that the US-China trade dispute has cooled, tensions remain, Financial Supervisory Commission Chairman Wellington Koo (顧立雄) said on the sidelines of an event in Taipei.

The dispute has encouraged many Taiwanese firms operating in China to return home, he said.

“The production shift in the supply chain might help Taiwan’s economy fundamentally. We hope companies with high-value-added production would return to Taiwan, while moving [lower value-added] production to Southeast Asia to avoid [US] tariffs,” he said.

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