Bank of America Merrill Lynch yesterday maintained its positive outlook on the local stock market for the next month, adding that investors should be tactically overweight in the high-tech sector to take advantage of this upturn.
The investment bank’s research team said the TAIEX would likely reach a peak of 8,600 points in the near future — possibly as early as this month or next month, or in the fourth quarter — amid growing optimism, Tony Tseng (曾省吾), head of Taiwan Research at Merrill Lynch Securities, told reporters yesterday.
The target is based on the TAIEX’s five-year price-to-earnings ratio average of 19.4 times and price-to-book ratio of 2.1 times, Tseng said.
The index fell 1.46 percent to 7634.92 yesterday, matching a decline in global shares. Market turnover was NT$74.98 billion (US$2.36 billion). Foreign investors and Chinese qualified domestic institutional investors were net sellers of NT$4.13 billion.
The forecast was also based on new positive signs, including an improving technology sector, which accounted for half of the market’s value, the imminent signing of an economic cooperation framework agreement (ECFA) between Taiwan and China, as well as stable monetary policy, Tseng said in a report dated Thursday.
Tseng said investors should be overweight in tech shares, as stock prices are expected to recover amid easing labor and component shortages and improving gross margins.
Top picks of tech stocks included Mediatek Inc (聯發科), the nation’s biggest handset chip designer, electronics manufacturing service provider Hon Hai Precision Industrial Co Ltd (鴻海精密), power supply provider Delta Electronics Inc (台達電), camera module maker Largan Precision Co Ltd (大立光), Kinsus Interconnect Technology Corp (景碩科技) and Synnex Technology International Corp (聯強).
Merrill Lynch, in collaboration with Taiwan Stock Exchange Corp, is hosting a two-day “Taiwan, Technology and Beyond” conference in Taipei beginning today. More than 110 corporations and about 400 institutional investors and fund managers from around the world are expected to attend the conference.
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