There are few safe bets in the local bourse for equity investors as a global trade war appears about to break out, analysts said, with one adviser saying that the best strategy is to pick areas with lower risks.
“It is impossible to find absolute safe bets, but it might be wise to look at the US technology supply chain, US domestic demand-related industries and Taiwanese domestic industries, while avoiding Chinese supply chains,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Vincent Chen (陳豊丰) said in a note on Thursday last week.
“Dividend yield plays can also be safe havens in an uncertain environment,” Chen added.
Taiwanese shares have risen 2.41 percent so far this year, but the main board has entered consolidation mode over the past few weeks amid growing worry about rising global trade tensions.
The TAIEX closed at 10.899.28 on Friday, down 1.7 percent for the week.
Chen said there is no clear picture until July 6, when the first round of tit-for-tat penalties announced by the US and China is set to take effect.
“No matter how the trade conflict develops after July 6, we believe that the stock market will become choppy, as the gap between the 10-year and two-year US Treasury yield rate has narrowed to 37 basis points, which normally suggests rising equity market volatility,” Chen said.
Jih Sun Securities Investment Trust Co (日盛投信) fund manager Chang Ya-wei (張亞瑋) agreed, saying that investors would most likely take a wait-and-see stance at the moment.
“The developing trade disputes [among major economies] will see actions and counteractions, and might take more time to negotiate and resolve, and there are many uncertainties involved in the process,” Chang said in a report on Friday.
The local bourse has become directionless, Chang said, adding that investors could take a cue from the near-term movement of the US dollar and wait for Taiwan Semiconductor Manufacturing Co’s (台積電) business guidance, which the chipmaker is to announce at an earnings conference on July 19.
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