Barclays upbeat on TAIEX, but cautions investors

By Kevin Chen  /  Staff reporter

Wed, Feb 06, 2013 - Page 14

Barclays Capital yesterday said the upside momentum of the local stock market would continue through the end of this month, but cautioned investors against being overly optimistic about recent policy announcements and government personnel changes.

Barclays’ remarks came after Taiwan and China completed cross-strait meetings on the securities sector last month and the government announced a Cabinet reshuffle earlier this week, while domestic banks begin yuan-based deposits and loans today.

Barclays said the local bourse had in recent sessions seen non-tech shares (financials, property and materials) and selected tech shares (semiconductors and some PCs) surprisingly outperform the bourse. The TAIEX closed 0.45 percent lower at 7,886.94 points yesterday.

However, “it remains too soon to harvest these sprouts, as the government can now seize on this new hope of economic recovery, closer ties with China and the gradual tech recovery as an opportunity to reverse record low approval ratings of 13 percent for the president and reverse the negative sentiment from unpopular policies last year,” Barclays equity researchers led by Kent Chan (陳衛斌) said in a report issued yesterday.

The brokerage maintained its full-year target for the TAIEX at 8,500 points, on expectations that more constructive policy will be provided by the new Cabinet, as well as on hopes of Taiwan’s improving ties with China and better macroeconomic conditions abroad.

Barclays’ target compared with Credit Suisse’s full-year target of 8,300 points for the TAIEX amid upbeat sentiment toward cross-strait relations this year.

In the research report, Barclays said it remained upbeat about financial shares, even though the financial sub-index has risen about 8 percent since the beginning of the year, versus the 3 percent increase of the TAIEX over the same period.

“It is too soon to sell, but we do prefer insurers over banks,” the report said, adding that valuations of financial stocks remain low compared with their regional counterparts.

Based on data compiled by the local bourse, the Barclays report said local investor participation usually increases after the Lunar New Year, so Barclays believes the market momentum might continue through the second half of the month.

Trading on the stock market will be suspended from tomorrow for the Lunar New Year holiday and will be resumed on Feb. 18.