The TAIEX may extend gains this year, Deutsche Bank AG said, citing a faster-than-expected recovery in the global economy.
The benchmark index may climb to 8,000, Deutsche Bank analyst Julian Wang (王俊朗) wrote in a report yesterday, raising a previous estimate of 7,000 and naming China Steel Corp (中鋼) and Far Eastern Textile Co (遠紡) among the bank’s top picks.
The TAIEX index rose 20.41 points, or 0.30 percent, to 6,868.65 yesterday as bargain hunters stepped in following recent falls, dealers said.
In volatile trade, the market opened slightly up before dipping to an intraday low of 6,776.08 in the morning before drifting back to positive territory.
“This was a rebound following the recent falls,” Allen Lin of Concord Securities Co (康和證券) said.
Having fallen below the 20-day moving average of 6,900 points, the market tested the 60-day moving average of about 6,685, he said.
“The market could continue to test the 60-day moving average next week,” Lin said.
The local bourse is closed today because of Typhoon Morakot.
The TAIEX has gained 49 percent so far this year, outpacing 76 other global indexes tracked by Bloomberg. Shares in the gauge are trading at 24 times current-year estimated earnings, almost triple the multiple of 8.5 times on Oct. 27.
With the global economy “recovering faster than expected, we believe investors will now feel more comfortable adding more positions in Taiwan,” Deutsche’s Wang wrote.
“Although the TAIEX does not seem cheap, the greater confidence in a cyclical recovery could lead to more earnings upside over the next six to 12 months than we had previously anticipated,” Wang said.
Taiwan and China are working to sign a memorandum of understanding (MOU) to form a supervisory mechanism for financial services companies operating in both markets. The two sides also aim to start formal talks by October on an an Economic Cooperation Framework Agreement, or ECFA.
“We believe the market underestimates the significance of the financial MOU and ECFA signing in terms of the long-term boost to retail confidence,” Deutsche Bank said. “Intensifying discussion on ECFA may generate more investor interest in industrial sectors such as chemicals and steel.”
Deutsche Bank raised its ratings on so-called upstream technology to “neutral” from “underweight” because of better-than-expected results and guidance, and advised clients to buy Taiwan Semiconductor Manufacturing Co (台積電), Asustek Inc (華碩) and Hon Hai Precision Industry Co (鴻海).
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