Daiwa Securities has raised its six-month target for the TAIEX to 8,800 points, from 8,200 points, as Taiwan’s economic fundamentals have shown signs of improvement.
Daiwa Securities said large foreign fund inflows are expected to continue to provide support to the local bourse and push the index to a level higher than the brokerage had previously expected.
In a recent research note, the Japan-based brokerage said Taiwan’s GDP for this year is expected to grow 2.3 percent, an upgrade from its earlier estimate of a 2 percent increase, because of a recovering global economy.
Daiwa Securities said Taiwan’s GDP is likely to grow 3 percent next year, which is higher than its previous forecast of 2.5 percent growth.
Still, Daiwa Securities’ forecasts are lower than the government’s estimates, which said that GDP is likely to grow 2.31 percent and 3.37 percent this year and next year respectively.
Despite concerns over the US Federal Reserve’s likely scale down of its monthly US$85 billion bond buying program later in the year, Taiwan has become an increasingly popular destination for foreign investment, Daiwa Securities said.
Last month, foreign institutional investors served as net buyers of NT$121 billion (US$4.10 billion) worth of local shares, the highest monthly figure in 10 years.
In the first four trading sessions, foreign institutional investors bought a net NT$20.8 billion.
The brokerage said it expects the local bourse to continue to benefit from the ample liquidity.
On Friday, the weighted index on the main board closed up 0.06 percent at 8,364.55 points.
Daiwa Securities added that it favors local suppliers for Chinese smartphone vendors and Apple Inc, biotech stocks, and interest rate-sensitive financial firms.
The brokerage’s eight top picks for the nation include Hon Hai Precision Industry Co (鴻海精密), which assembles iPhones and iPads, smartphone chip designer MediaTek Inc (聯發科) and power management system provider Delta Electronics Inc (台達電).
The others are Mega Financial Holding Co (兆豐金控), Cathay Financial Holding Co (國泰金控), TTY Biopharm Co (台灣東洋藥), notebook computer maker Pegatron Corp (和碩) and battery supplier Simplo Technology Co (新普科技).