Taiwan’s benchmark TAIEX could see a 20 percent upside this year, although the economy may face risks from rising interest rates after the second half of this year, which will make the first half a good time to buy, an HSBC investment strategist said yesterday.
“Taiwan is our No. 1 pick in Asia,” Arjuna Mahendran, head of the bank’s investment strategy in Asia, told an investment outlook briefing in Taipei.
Mahendran forecast that Asian bourses would see an average upside of between 15 percent and 20 percent this year, while their currencies, including the New Taiwan dollar, would also appreciate in tandem with the Chinese yuan’s projected 5 percent gain by the end of the year.
The TAIEX is sure to benefit from closer ties with China, which will fuel domestic economic recovery, and its concentration on technology shares, which the bank rates as “overweight,” he said.
Deflationary pressure, however, may be rekindled, hurting the nation’s nascent recovery should the central bank tighten credit too soon or too much, he said.
Despite that, this year looks to be a fairly strong year, the investment strategist said, adding that investors should “not buy to hold, but buy to trade,” while staying nimble and seeking protection in two to three years’ time.
Mahendran was optimistic about the economic recovery in the US “at least for the next six months,” where high net worth consumers have felt limited impact from the country’s debt issues and would continue to make up more than 60 percent of US consumption now that balance sheets have been fixed after the value of properties and pension funds rebounded.
That spells good news for export-oriented Asia, where stimulus measures have also been launched to keep the region’s other engine — domestic consumption — running, he said.
To fund infrastructure projects, Asian governments may start borrowing through bond markets, which will present another sweet spot for investors to start building a portfolio for Asian bonds, he said.
He also took a neutral view toward China’s move last week to raise its required bank reserve ratio, which he said aims to reduce the country’s inflationary risk and won’t kill its recovery.
Mahendran called for a strategy of three categories — beneficiaries of recession, growth surprises and “green” investing.
By that, he said the bank favors holdings in BRIC countries (Brazil, Russia, India and China) or Western companies, which export to these countries.
The bank also has a “buy” rating on energy infrastructure, from coal, oil exploration and water to technology shares, agriculture and cement.
The bank also favors Asian stock exchanges and the Asian property sector, which the HSBC banker expects to continue to benefit from excess liquidity in the next two years.
The bank forecast that China, Taiwan, the Asia-Pacific region and the US would see 9.5 percent, 5.1 percent, 4.8 percent and 2.7 percent growth respectively this year, its press statement said yesterday.
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