Foreign investors could maintain their interest in Taiwan’s equity market this year as a steady local currency and sufficient foreign-exchange reserves might offset potential economic uncertainty stemming from potential US rate hikes, UBS Securities Pte Ltd said yesterday.
This year could be a “transition year” for the local bourse, UBS Taiwan equities and research head William Dong (董成康) said, predicting that a tug-of-war between negative and positive factors would pull the market in opposite directions throughout the year.
“To some extent, Taiwan’s equity market might still be attractive to foreign investors,” Dong told a media briefing.
Dong said the relatively stable exchange rate of the New Taiwan dollar, as well as strong foreign-exchange reserves, would be the nation’s two major advantages in attracting investors.
As a result, UBS expects the local bourse to see a gain by the end of the year, with the year-end target of the benchmark TAIEX set at 9,650.
“The market has the potential for a pullback in the middle of this year, but should rebound in the second half, driven by [better] dividend yields, seasonal pickups and a rally prompted by the elections,” Dong said.
The nation’s technology sector is entering a seasonal slowdown, which might have a short-term headwind effect on the equity market. On the positive side, domestic retail investors might see the January effect provide a boost to the market which would run through to the Lunar New Year holiday, he said.
UBS Taiwan Wealth Management head Dennis Chen (陳允懋) said more new investors have chosen to allocate up to 50 percent of their assets in the nation, reflecting an increasing trend of overseas capital returning to Taiwan in the past two years.
However, Deutsche Bank AG took a more conservative approach to the nation’s equity outlook this year.
After three years of good performances, as the technology product cycle peaks and corporate earnings growth slows down, in conjunction with a strong US dollar, the indications are not good for the market, Deutsche Bank Taiwan head Joelian Tseng (曾慧瓊) and fellow analysts said in a report.
Deutsche Bank reduced its 12-month target for the benchmark TAIEX to 9,000.
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