Thu, Jan 09, 2020 - Page 12 News List

TAIEX likely to perform well this year: Schroder

OUTLIER:Taiwanese firms that aim to return home to diversify risks would realize their investment pledges, which is expected to shore up domestic demand

By Crystal Hsu  /  Staff reporter

The TAIEX is likely to trend up this year as corporate profits could stage a rebound now that the US and China have agreed to a partial trade deal, Schroder Investment Management Taiwan (施羅德證券投資) said yesterday.

The nation’s main board rallied above 12,000 points toward the end of last year, outperforming Asian bourses, as Taiwan benefited from the US-China trade dispute, Schroder Taiwan fund manager Kevin Chan (詹祖光) told a news conference in Taipei.

Some local firms reaped windfalls from order transfers and trade rerouting, but most took a hit from trade tensions until the fourth quarter, when exports began to rise again, Chan said.

The economic landscape looks less uncertain this year, as Washington and Beijing are expected to sign a “phase one” trade deal on Wednesday next week and plan to hold more talks to iron out their differences, he said.

A de-escalation in the dispute would allow international technology brands to better facilitate development of next-generation devices and enable Taiwanese firms to ramp up production in their supply chains, Chan said.

Meanwhile, Taiwanese firms that aim to return home to diversify risks would realize their investment pledges, which in turn, would shore up domestic demand, he said.

Local shares have partly benefited from this rosy outlook as evidenced by an influx of hot money over the past few months, he added.

However, local shares remain inexpensive compared with regional equities, with the price-to-book ratio standing at 1.8, lower than earlier highs seen in good times, Chan said, adding that the gauge would drop to 1.5 if Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the most weighted stock among Taiwanese shares, were excluded.

TSMC, which supplies chips used in smartphones by US and Chinese brands, is a top choice among foreign institutional players.

The US-Iran conflict is upsetting geopolitical stability, but should not threaten the global economy, Schroder Taiwan chief investment officer Jordan Chen (陳朝燈) said.

However, unease prompted foreign institutional investors to reduce holdings in local shares this week.

The TAIEX dropped 0.53 percent to 11,817.10 yesterday, extending losses from a session earlier, and turnover on the main board fell to NT$149.51 billion (US$4.97 billion), compared with NT$164.811 billion on Tuesday.

Government-led funds were said to pick up some electronics heavyweights, in particular TSMC, which limited the downturn by the end of the session.

Foreign institutional investors sold a net NT$1.23 billion in shares on the main board after a net sale of NT$9.82 billion the previous day, Taiwan Stock Exchange data showed.

Additional reporting by CNA

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