Taiwanese shares have risen just 1.72 percent so far this year, but the local market is expected to follow a “bumpy ride up” trajectory and jump 14.5 percent next year from yesterday’s closing level, Credit Suisse Group AG said in its latest strategy report.
“We expect a moderate expansion for the Taiwan index in 2011 and set a year-end target for the TAIEX at 9,500,” Credit Suisse analyst Randy Abrams said in yesterday’s report.
Local shares closed 0.38 percent higher at 8,297.05 yesterday.
The upside road is expected to be “bumpy” because of the lingering economic uncertainties in the developed economies and monetary policy tightening in China to fight inflation and hot money inflows, the report said.
In addition, tensions flaring up in the Korean Peninsula and uncertainty for the 2012 presidential election would also add to trading volatility on the local bourse before reaching that target, it said.
“However, we see a positive lift due to good tech product cycles, a healthier domestic sector, still more opening of ties with China and supportive valuation,” Abrams wrote.
Credit Suisse’s optimistic forecast for TAIEX next year came in stark contrast with BNP Paribas Securities Co’s cautious predictions on Monday.
In the report written by BNP strategists Clive McDonnell, the Hong Kong-based brokerage said Taiwan would likely be the weakest market in Asia except Japan next year, lifting the TAIEX target only to 8,700 points by the end of next year from 8,600 previously estimated.
Both Credit Suisse and BNP Paribas said in their reports that they believed an improving domestic economy and widening trade exchanges between Taiwan and China would boost more of Taiwan’s non-tech shares rather than those of export-reliant tech shares.
Credit Suisse’s favorite non-tech sectors are transportation, private banks, petrochemicals and developers, while BNP Paribas focuses on banks, asset developers, airlines and tourism, the reports showed. As for technology shares, Credit Suisse is selective and focuses only on shares with large capitalization.
JPMorgan is also selective on technology shares in its portfolio, with preferences mainly focusing on notebook, flat panel display, foundry and circuit board makers, according to its Taiwan strategy analysis released on Nov. 15.
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