If investors had followed Spencer White's advice about Taiwan stocks, they would have missed out on a 51 percent gain in dollar terms in the world's second-best performing market in the last three months.
Now, in an about-face, the Taiwan head of research at Merrill Lynch & Co is keen to make amends. White reckons the benchmark TAIEX could rise by a fifth from current levels. The index closed last year at 5,551.24.
"The worst thing you can do when you are an analyst or fund manager is to stick to your position even when it's clear you're wrong," said White, who recommended that investors hold off on buying stocks as the index began its climb in October. "We're not infallible."
Taiwan's gains, Asia's fourth-largest stock market by value, were second only to Turkey's 92 percent gain in dollar terms. The shares in the Taiwan's electronics makers have gained 28 percent in the past month, following indications from Korean rivals such as Samsung Electronics Co that demand for computer chips may be recovering.
White's new forecast, like many other analysts', is based on expectations the US economy will begin to recover by the second half of this year, and help lift demand for the nation's exports.
More than a fifth of Taiwan's exports go to the US, comprising mainly computers, chips and mobile phones.
"Most stocks are accurately predicting a pickup in the US economy," said Michael Grant, who manages about US$250 million in tech shares at Schroder Investment Management in San Francisco.
The US economy probably will start expanding by the second quarter of next year, following three straight quarters of contraction.
Barely a month after the Sept. 11 terrorist attacks in the US, White had told investors not to buy the Taiwan's stocks because he was unsure when growth would recover in the US.
With Taiwan Semiconductor Manufacturing Co (
The former fund manager at AIB Govett Asset Management isn't the only one to get it wrong.
Christopher Wood, ABN Amro Holdings NV's chief global emerging markets strategist, has been saying since June that overspending on technology by US companies in recent years means that there is little likelihood demand is going to pick up for electronics goods in the US in this year.
"I've been most wrong on Taiwan," said Wood, who said the Taiwan index may rise as high as 6,000 within the first three months of this year.
Still, a US-led economic recovery won't be the lone savior of the Taiwanese market, he said. Underlying economic problems may take the index down to 3,000 later in the year.
The Taiwan's economy is expected to post a 2.3 percent for last year.
"The economy is deflating and there is a huge financial mess among the banks," Wood said.
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