The near-term outlook for the local bourse appears “cautiously optimistic,” UBS Securities Pte Ltd said, citing concerns that liquidity uncertainties might rise on further interest rate hikes by the US Federal Reserve.
Since the beginning of this year, liquidity has been one of the key drivers in the local market, UBS Taiwan equities research head William Dong (董成康) told reporters on Friday in Taipei.
Foreign institutional investors have bought about US$8.4 billion of Taiwanese stocks this year and are responsible for pushing up the TAIEX by an estimated 9.3 percent out of an overall 12.2-percent rise since the beginning of this year.
Photo: CNA
The gains on the local main board translate to a 16.8 percent gain in US dollar terms after factoring in the 6.9 percent appreciation of the New Taiwan dollar against the greenback, he said.
However, in light of the Fed’s current cycle of interest rate hikes, it remains uncertain whether the inflow would continue, as funds might be directed elsewhere in search of higher returns after taking profits on positions in Taiwanese stocks, Dong said.
Investors are urged to monitor moves by institutional investors in August and September, which coincides with the end of the annual dividend payout season, as well as the inventory ramp-up period for the highly anticipated launch of Apple Inc’s latest iPhone model, Dong said.
High hopes for the handset have seen the technology sector push the TAIEX and continue buoying the local bourse this year, he said.
Excitement surrounding this year’s iPhone is significantly higher compared with a year earlier, Dong said.
At the same time, year-to-date gains on the TAIEX have been mostly concentrated among technology sector companies that have been selected as suppliers for Apple’s new iPhone models likely to be launched next quarter, he said.
In its Connections Series report published on May 23, Credit Suisse Group AG predicted significant pent-up demand for this year’s iPhone, with sales of the handset line forecast to rise from last year’s 214 million units to 230 million units this year.
Meaningful upgrades to this year’s model include an OLED screen, 3D sensing, revamped casing and a glass cover design with a stainless steel frame, UBS said.
Yuanta Securities Investment Consulting Co (元大投顧) in a June 6 report downplayed concerns about a possible delay to the launch of the new iPhone, citing progress on production issues with regard to the yield rates of A11 chips, 3D sensing modules and OLED screens.
The handset would also use the frustrated total internal reflection solution to be able to fit a fingerprint reader under the coverglass, Yuanta said.
Whether the new iPhone models will meet expectations is to become clear at the end of next quarter and the outcome will be among the most important factors affecting the flow of foreign capital, Dong said.
Should the outcome be unfavorable for the technology sector, investors would have few alternatives, he said.
The tapering of quantitative easing measures by the US has led to low government bond yields, limiting the prospects of financial firms and life insurers in particular, while low oil prices could drag on petrochemicals, Dong said.
Dong gave a conservative outlook on consumer staples and airlines.
While UBS highlighted emerging fields including artificial intelligence, electric vehicles, factory automation and automotive semiconductors at its annual investors conference, none of these are capable of replacing the volume and momentum of smartphones for global suppliers in the near future, Dong said.
No other single product determines Taiwan’s export-oriented economy to the same extent, experts and institutional investors have said.
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