Taiwan is on a tear. The nation’s equities are attracting the most foreign cash in about a year, with inflows topping any other Asian peer, and the benchmark TAIEX is up 18 percent from its bear-market low.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the biggest stock on the gauge, surged to a record this week.
Investors are turning their attention to Taipei amid renewed optimism about economic prospects under president-elect Tsai Ing-wen (蔡英文) and confidence that global demand for gadgets will buoy the component makers that dominate Taiwan’s bourse.
Photo: CNA
Taiwanese equities have rebounded from a shaky start in January, when foreign investors fled on concern that an election victory by Tsai’s Democratic Progressive Party would hurt cross-strait relations.
“There was a lot of fear in the Taiwanese market ahead of the elections,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd in Sydney. “Nothing has really gone wrong since. Investors are starting to reallocate funds into Taiwan.”
Foreign asset managers have pumped US$2.9 billion into Taiwanese shares so far this month, the second month of net inflows and already poised for the most since April last year, data compiled by Bloomberg showed. That is also the largest amount among eight Asian markets tracked by Bloomberg.
The TAIEX’s 4.8 percent gain this year compares with a 2.9 percent decline by the MSCI Asia Pacific Index and the Taiwanese gauge is trading near the highest level relative to the broader measure in about a decade, data compiled by Bloomberg showed.
Traders are loading up on options that protect against declines on the TAIEX. The ratio of outstanding puts versus calls rose to 1.7 on Monday, the highest since the middle of 2014. The TAIEX closed 0.41 percent higher at 8,734.54 points yesterday.
While Tsai won over moderate voters wary of provoking China by pledging to uphold the “status quo” and focus on economic issues, she has not endorsed the “one China” principle.
Tsai, whose party also won its first legislative majority, has promised to boost growth by focusing on five areas: biotechnology, green technology, national defense, smart machinery and the Internet of Things.
“I don’t think the progress that has been made and the stronger ties between Taiwan and the mainland can be unwound. I do not think they can go backward. I am not particularly worried about that,” said Bill Maldonado, the Hong Kong-based global chief investment officer for equities at HSBC Global Asset Management. “Investors are looking forward and waiting to see what the policy agenda of the incoming government will be.”
Following the rally, shares on Taiwan’s benchmark index are valued at 14 times earnings, compared with multiples of 9.3 times in Hong Kong and 13 times in Singapore, data compiled by Bloomberg showed.
Mark Mobius, executive chairman of Templeton Emerging Markets Group, said he remains underweight on Taiwan as there are cheaper stocks elsewhere in the region.
Pauline Dan, whose Pictet Greater China fund counts TSMC as its largest investment, sees room for further gains in the world’s top producer of chips used in smartphones and other gadgets.
TSMC shares increased 1.6 percent to close at an all-time high of NT$158.5 yesterday, with its market capitalization reaching a new high of about NT$4.11 trillion (US$125.67 billion).
“Globally there’s continuous growth in demand for electronics, for handheld devices, wearable products and robotics,” said Dan, head of Greater China equities at Pictet Asset Management in Hong Kong. “You need semiconductors for these and TSMC is at the forefront of the industry.”
Hsieh Chin-ho (謝金河), chairman of Taiwan-based Investment Media Ltd (財金文化), said TSMC has become a safe haven for foreign institutional investors.
On his Facebook page, Hsieh said that TSMC had risen more than 20 percent from a recent low of NT$131.50 in mid-January.
Hsieh said that the strength of TSMC largely came from foreign institutional investors, who have purchased a net 308.19 million TSMC shares so far this year to push the stock up to an intra-day high of NT$160 yesterday.
Additional reporting by CNA
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