Investors should buy Taiwanese bank shares such as Cathay Financial Holding Co (國泰金控) to take advantage of the nation's economic growth and rising demand for loans, JPMorgan Chase & Co's Krista Yue said yesterday.
Cathay Financial, the biggest financial services company, is the Taipei-based head of equity research's top pick and she also favors smaller rivals Ta Chong Bank Co (大眾銀行) and Bank of Kaohsiung(高雄企銀). Yue has an "overweight" recommendation on financial shares.
"Financials are the best leverage for Taiwan's domestic recovery," Yue said. "Strong corporate earnings growth across the board this year will lead to more investments and jobs down the line, creating a very healthy environment for 2005."
Relatively low interest rates and export growth have encouraged companies to increase borrowing and investments, fueling the nation's four quarters of economic expansion. Loans and investments by financial companies rose for a 10th month in August to US$445 billion, according to the latest figures from the nation's central bank.
Improved investor confidence and a possible overshoot of valuations on financial assets may boost the benchmark TAIEX to climb as high as 10,000 by the end of next year, the strategist said.
Financial stocks are expected to retain their momentum after President Chen Shui-bian (
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