UBS AG yesterday said that it was about time for investors seeking long-term gains to buy Asian tech shares that have growth potential.
UBS said that concerns about a slowing global economy, which could hurt consumption of electronics, had kept investors on the sidelines recently, although recovery in demand is taking shape on seasonal factors.
It expects the uncertainty to clear up in the second half of next year after the conventionally slack period in the first six months.
OPTIMISM
"We are optimistic about the second half of 2007. The economy is likely to make a soft landing as it did in the last cycle," said William Dong (董成康), an executive director of UBS in Taipei, citing the similarity between the recent cycle and the last downturn beginning in 2004.
Microsoft Corp's latest operating system Vista, new game consoles and the growing population of third-generation (3G) phones would spur demand, Dong said.
In addition, the price-to-book (P/B) ratio for Asian technology stocks has recently dropped to between 1.8 and 2.1, compared to about 2.1-2.2 in recent years, UBS said.
"That provides an opportunity for people to invest in the long term. Those tech shares are not expensive at all now," Dong said.
A P/B ratio is a ratio used to compare a stock's market value to its book value, in order to identify undervalued stocks. A lower P/B ratio could mean that the stock is undervalued.
"Companies with potential for long-term growth such as market share expansion will be good investment targets," Dong said, without naming specific stocks.
HANDSET STOCKS
Dong said handset stocks "are quite good" as global mobile phone sales would grow further next year, partly driven by growing demand for 3G phones and phones with red-hot push-mail functions.
"Benefiting from the ongoing outsourcing trend, Taiwanese companies will still have ample room for growth," Dong said.
UBS retained a "neutral" rating on Taiwanese technology stocks, despite the recent political instability caused by plans for a massive sit-in scheduled for Saturday to protest against President Chen Shui-bian (陳水扁) and government corruption.
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