Goldman Sachs Group Inc raised its recommendation on Taiwan stocks to "overweight," the highest rating, from "neutral," expecting electronics companies earnings to rise and currency depreciation to boost exports.
Anand Aithal, chief equity strategist for Goldman in Asia outside Japan, said in a note to clients that while political concerns may prevent the key TWSE Index from making significant gains immediately, anxiety will fade and shares will rise.
"The Taiwan dollar's depreciation benefits technology, chemical and steel companies," Aithal said in a e-mail to Bloomberg.
"Exporters are likely to benefit as their revenues are largely in US dollars, while their costs are mostly in Taiwan dollars." Goldman is manager of the global share sale of Taiwan government-controlled telecommunications company Chunghwa Telecom Co Ltd (
Goldman's recommendation didn't help the key TWSE Index today. It dropped 56.71 points, or 1.1 percent, to 5,170.08, and has fallen 6.3 percent in the past 30 days, as Taiwan companies reported declining sales and the economy deteriorates.
The Chinese government, riled by Chen's visit to the US on his way to Latin America, is staging war games off the coast of Zhejiang province, near Taiwan.
The Taiwan dollar dropped 0.1 percent to 33.493 to the US dollar matching a more-than 2 1/2-year low reached earlier this week.
The government will probably report today that the economy grew 3 percent in the first quarter, the smallest expansion in more than 25 years, according to the median forecast of 15 economists surveyed by Bloomberg.
Aithal expects the TWSE Index to rise to as high as 6,000 points by December and 7,000 within 12 months.
He cut his rating to "neutral" from "overweight" on March 1, when the level of the TWSE Index was 6 percent higher than its current level.
He recommends investors buy China Steel Corp (中國鋼鐵), the island's biggest steelmaker, Asustek Computer Inc (華碩電腦), Taiwan's biggest motherboard maker, Taiwan Semiconductor Manufacturing Co (台積電), the biggest made-to-order chipmaker, and Nan Ya Plastic Corp (南亞塑膠).
Goldman recommends that investors in Asia-Pacific equities sell Australian stocks and invest the money in Taiwan, rather than sell Hong Kong or China stocks to pay for Taiwan shares.
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