The US Federal Reserve’s first interest rate increase in nearly a decade is not expected to cause a significant flight of money out of Taiwan, Yuanta Securities Investment Consulting Co (元大投顧) said.
The Fed’s rate hike on Wednesday was followed by the central bank’s decision the next day to cut interest rates — and that decision might generate a boon for the TAIEX by bringing in the liquidity the market needs, Yuanta said on Friday.
Just hours after the Fed said it was raising key rates by 25 basis points, Taiwan’s central bank cut its policy rates by 12.5 basis points for the second time in three months.
“This helps market liquidity, which is good news for investors,” Yuanta’s equity strategist Vincent Chen (陳豊丰) said in a client note.
Chen said the impact of the Fed’s rate hike on Taiwan’s stock markets would be similar to the round of tightening in 2004, when foreign institutional investors racked up net sales of Taiwanese shares for two to three months before significantly increasing their holdings.
“Since the Taiwan market endured a severe correction in August, we believe room for a further slump is limited,” Chen said.
In addition, 10 out of 13 stock markets worldwide had risen within six months following the Fed hike in 2004, he said.
Based on Taiwan Stock Exchange statistics, foreign institutional investors turned to net buyers of local equities after Wednesday, having net sold for two sessions earlier the week, leading to a net purchase of NT$1.05 billion (US$31.7) in Taiwanese shares for the whole of last week.
Despite signs of bargain-hunting on Friday, the TAIEX closed down 0.75 percent to 8,257.32, compared with a 1.65 percent gain in previous session.
For the week, the benchmark index rose 1.74 percent from the previous week.
Overall, the TAIEX is expected to fluctuate between 8,000 and 9,000 points next year, supported by resilient share price performance of leading semiconductor companies, as they are expected to begin outperforming in the first quarter as the financial sector begins to stabilize, Yuanta said.
Leading electronic components makers in Apple Inc’s supply chain are expected to start to perform well in the third quarter next year, while non-technology firms might see their shares continue advancing in cyclical rotation next year thanks to good fundamentals, Chen said.
Other positive catalysts for the TAIEX next year include an anticipated rise in mergers and acquisitions by Taiwanese companies, high dividend payout, low valuation and the anticipated economic recovery in the US, he said.
GEOPOLITICAL ISSUES? The economics ministry said that political factors should not affect supply chains linking global satellite firms and Taiwanese manufacturers Elon Musk’s Space Exploration Technologies Corp (SpaceX) asked Taiwanese suppliers to transfer manufacturing out of Taiwan, leading to some relocating portions of their supply chain, according to sources employed by and close to the equipment makers and corporate documents. A source at a company that is one of the numerous subcontractors that provide components for SpaceX’s Starlink satellite Internet products said that SpaceX asked their manufacturers to produce outside of Taiwan because of geopolitical risks, pushing at least one to move production to Vietnam. A second source who collaborates with Taiwanese satellite component makers in the nation said that suppliers were directly
Taiwan’s technology protection rules prohibits Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) from producing 2-nanometer chips abroad, so the company must keep its most cutting-edge technology at home, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. Kuo made the remarks in response to concerns that TSMC might be forced to produce advanced 2-nanometer chips at its fabs in Arizona ahead of schedule after former US president Donald Trump was re-elected as the next US president on Tuesday. “Since Taiwan has related regulations to protect its own technologies, TSMC cannot produce 2-nanometer chips overseas currently,” Kuo said at a meeting of the legislature’s
Top Taiwanese officials yesterday moved to ease concern about the potential fallout of Donald Trump’s return to the White House, making a case that the technology restrictions promised by the former US president against China would outweigh the risks to the island. The prospect of Trump’s victory in this week’s election is a worry for Taipei given the Republican nominee in the past cast doubt over the US commitment to defend it from Beijing. But other policies championed by Trump toward China hold some appeal for Taiwan. National Development Council Minister Paul Liu (劉鏡清) described the proposed technology curbs as potentially having
EXPORT CONTROLS: US lawmakers have grown more concerned that the US Department of Commerce might not be aggressively enforcing its chip restrictions The US on Friday said it imposed a US$500,000 penalty on New York-based GlobalFoundries Inc, the world’s third-largest contract chipmaker, for shipping chips without authorization to an affiliate of blacklisted Chinese chipmaker Semiconductor Manufacturing International Corp (SMIC, 中芯). The US Department of Commerce in a statement said GlobalFoundries sent 74 shipments worth US$17.1 million to SJ Semiconductor Corp (盛合晶微半導體), an affiliate of SMIC, without seeking a license. Both SMIC and SJ Semiconductor were added to the department’s trade restriction Entity List in 2020 over SMIC’s alleged ties to the Chinese military-industrial complex. SMIC has denied wrongdoing. Exports to firms on the list