Local smartphone component suppliers such as touch panel makers should be among the top picks for equity investment in the first half of next year, UBS Securities said yesterday.
The suggestion was based on UBS’ optimism about the local stock market and increasing uptake of smartphones around the world.
William Dong (董成康), managing director of UBS’s Taipei branch, expected a liquidity-driven year for the TAIEX next year as more overseas funds are expected to flow into the local stock market looking for investment opportunities.
“We are bullish about the TAIEX next year,” Dong told a media briefing.
Earlier this month, Dong raised his forecast that the TAIEX would peak at 9,650 points in the second half of next year, from a previous estimate of 9,200.
The TAIEX closed 0.58 percent higher at 8,753.84 points yesterday.
Seasonal demand would give a boost to tech stocks, which have lagged behind Asian peers in the first half of next year, Dong said.
In the second half, he preferred traditional sectors and said financial stocks would benefit from closer trade ties between Taiwan and China as both sides were set to talk about removing more trade barriers following the signing of Economic Cooperation Framework Agreement (ECFA).
UBS said it was upbeat about the PC and smartphone sectors, but the smartphone sector would be a better investment target, given its stronger annual growth rate.
“We believe makers of -smartphones and smartphone companies are worth investing in. And we prefer component makers over handset makers,” UBS analyst Arthur Hsieh (謝宗文) said. “The main reason is component makers are selling to various brands and thus no matter whether a specific brand is selling well or not, component vendors have a better chance to benefit from overall industry growth.
Beside touch screen stocks, Hsieh said metal casing makers would be greater beneficiaries from growing demand for smartphones.
The worldwide smartphone market reached a new milestone in the third quarter as shipments grew 89.5 percent to 81.1 million units, from 42.8 million units a year ago, market researcher International Device Center (IDC) said last month.
“The market transition to smartphones is proceeding at a brisk and unabated pace,” IDC analyst Kevin Restiveo said.
On the PC sector, Hsieh said he also suggested buying PC stocks as growing corporate PC replacement would spur demand next year. Shipments of global notebook computers are expected to grow 14 percent year-on-year next year, he said.
Hsieh preferred PC makers with low debt and committed to high cash dividend delivery, but did not name any names.
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