Swiss brokerage firm UBS Securities yesterday cut its annual target for the TAIEX for the second time in a month, reducing the figure from 10,000 to 9,750 points over concern of a possible risk to earnings.
“There has been increased market volatility in Taiwan over the past week and also in other markets in the region — likely reflecting concerns over the situation in the eurozone, particularly,” UBS Taiwan equities and research head William Dong (董成康) said.
“While the outcome is uncertain, we think it could raise questions over Taiwan’s export-oriented economy, which is dependent on the state of the global economy,” Dong wrote in a note to clients.
The brokerage had previously reduced its TAIEX target from 10,600 to 10,000 points in a research report dated on June 4, citing concerns over fundamentals and uncertainty over the outcome of next year’s presidential election.
The analyst said the nation’s exports slowed during the first half of this year due to falling export prices, a slowdown in emerging markets and the roll-over of a positive technology product cycle.
Combined with recent events in Europe, the overall environment looks likely to remain challenging in the second half of the year, Dong said.
With many Taiwanese companies citing “low visibility” in the second half of this year, Dong said he sees a potential risk to his market earnings growth forecast of 7.7 percent for this year.
“We still think the market looks likely to rebound in the late third quarter of this year, with a seasonal increase in tech shipments, but we think there could be increased volatility in the fourth quarter, as the presidential election draws nearer,” Dong said.
“By sector, we maintain our overweight rating on technology and telecom stocks, but favor stock in firms involved in Apple [Inc]’s supply chain and those with high yields for greater stability,” he said.
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