Investors are advised to remain cautious and avoid stocks with high price-to-earnings (PE) ratios, weak cash flows and low earnings growth, as equity markets are overheating, Standard Chartered Bank Taiwan Ltd (渣打台灣銀行) said on Tuesday.
“We do not think that major stock markets are in a bubble now, although some securities’ PE ratios have been pushed too high as their share prices advanced,” head of investment strategy Allen Liu (劉家豪) told the Taipei Times at a meeting in Taipei.
Liu was referring to the ratio of a company’s stock price to its earnings per share. Companies with high PE ratios are often regarded as overvalued.
“However, given ample funds due to governments’ relaxed monetary policies and quantitative-easing programs, companies with high PE ratios are not necessarily bad targets,” Liu said.
Companies with high PE ratios could still be worth a look if their earnings are expected to grow this year, as higher earnings per share would drive down their PE ratios to a more reasonable level, he said.
Besides, firms that would benefit from future economic trends, such as digitalization or self-driving vehicles, could be good targets as their growth momentum could last longer, he said.
That is why some local tech stocks, whose profits have not risen significantly, have kept on advancing, as investors are banking on them benefiting from these trends, Liu said.
“It is safer and more important to buy the right stocks at a higher cost than buying cheap, but wrong stocks,” he added.
Investors should also check companies’ cash flow, he said.
A company that forecasts rising profits, but has cash flow problems might not be trustworthy, he said.
HSBC Global Asset Management Taiwan Ltd (匯豐中華證券投信) chief investment officer Julian Lin (林經堯) on Wednesday also said that stock markets are not in a bubble yet, as governments’ quantitative easing programs are forecast to continue.
Given that the real economies have not returned to their pre-pandemic level in most countries, governments would not end quantitative easing quickly unless there is serious inflation, which means there would still be ample funds supporting bull markets, Lin said.
With a low interest environment predicted to continue this year, people can invest in stocks for better returns, but need to be careful and agile in adjusting their portfolio, HSBC chairman Steve Lee (李選進) said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to post a 25 percent year-on-year increase in sales in the first quarter of this year to US$12.91 billion, up from US$10.31 billion a year earlier, as its production is at full capacity, market advisory firm TrendForce Corp said in a note last week. The increase would help TSMC cement its leadership in the industry by taking a 56 percent market share in the global pure wafer foundry business, TrendForce said. Its forecast was in line with TSMC’s estimate in January, which pointed to a range of US$12.7 billion to US$13 billion for the
MULTI-USE: The arrangement of seats in future vehicles would be different, allowing passengers to do everything they do at home, the CEO of the firm’s EV platform said Electric vehicles (EVs) developed on a Hon Hai Precision Industry Co (鴻海精密) platform would be built like “a smartphone on a different platform,” Jack Cheng (鄭顯聰), chief executive officer of the Hon Hai-initiated MIH Open Platform Alliance, said on Saturday. It would be the ultimate goal to make vehicles built on the platform an extension of the driver’s home, he said during an online presentation. The alliance aims to provide resources to automakers and boost Taiwan’s EV development, with a vision to make an EV its owner’s “second home,” Cheng said. “Whatever they can do in their home, they will be able
RARE POSITION: IHS Markit expects exports to increase by about 13 percent this year, as demand for electronics worldwide has recovered significantly since last year Taiwan’s economy might expand 4.1 percent this year, accelerating from a 3.11 percent pickup last year, as its exports would continue to benefit from surging demand for electronics products amid and after the COVID-19 pandemic, global research body IHS Markit said yesterday. Taiwan has been one of the world’s most resilient economies during the pandemic-triggered recession last year. Economic indicators at the beginning of this year signal improving growth momentum for its economy over the coming months, as the global economy and trade rebounds, the US-British information provider said. According to the latest IHS Markit survey of business confidence in Taiwan, the
Clean energy use and reduction of carbon dioxide emissions are the common consciousness of all countries in the world. Among them, the introduction of renewable energy storage systems and the promotion of electric vehicles are the unanimous implementation of governments and enterprises around the world. The most critical strategic component is the lithium ion battery. Whoever has a higher energy density, lower cost, and higher safety lithium battery will control the development trend of this wave of safer lithium battery technology. All-solid-state batteries are a goal that everyone is striving to pursue. However, the stable and large scale production of solid-state
RSS