The TAIEX would hover at about 17,470 points at the end of this year, with the weighted index witnessing more volatility in the third quarter due to uncertainty over the US’ monetary policy, UBS Securities Pte Ltd, Taipei Branch said yesterday.
The TAIEX yesterday closed up 0.07 percent at 17,075.55 points, down 3 percent from a record high of 17,595 points on April 27, but up 16 percent year to date, Taiwan Stock Exchange data showed.
The benchmark index is likely to remain at this high level at the end of the year, despite a spate of COVID-19 infections, as solid corporate revenues and exports should support the index, UBS analyst Ally Chen (陳玟瑾) told a videoconference.
Photo: Kelson Wang, Taipei Times
“For those companies we cover, we estimate their combined profits would grow more than 30 percent this year from last year,” she said.
Although the TAIEX fell after COVID-19 cases surged last month, it has quickly recovered, she added.
However, “huge volatility” in Taiwanese equities is also possible next quarter, as local stocks would be affected once the US Federal Reserve announces new liquidity-tightening measures, she said.
In 2013, when the Fed announced that it was ending its bond-buying program, which it began in 2008 in response to the financial crisis, the news took a toll on local stocks, Chen said.
However, by the time the Fed started reducing its purchases in 2014, local stocks had regained their momentum due to solid fundamentals, she said.
“Therefore, we might see a similar impact on the TAIEX next quarter, and we suggest investors avoid overpriced stocks that are less resilient to a tighter monetary policy,” Chen said.
Investors are also advised to monitor several key gauges, including corporate revenues, growth in demand for end products from the US and Europe after COVID-19 lockdown measures end and inflation’s effect on corporate earnings, she said.
Asked if local shipping stocks would remain strong due to rising freight rates, UBS head of Taiwan research James Kan (甘清仁) said that COVID-19 vaccination programs would play a role in it, because if more people are able to return to their posts, supply chain disruptions and port congestion would be relieved.
The vaccination rate in the US is predicted to hit 60 percent next month, which would normalize many businesses, he said.
“It is hard to imagine that freights rates would remain that high for long,” Kan added.
MANAGING RISKS: Taiwan has secured LNG sufficient to cover 95 percent of electricity demand for next month, UBS said, describing the government’s approach as proactive UBS Group AG has raised its forecast for Taiwan’s economic growth this year to 8 percent, up from 6.9 percent previously, and said expansion could reach as high as 8.6 percent if external energy shocks are avoided. The upgrade reflects a stronger-than-expected first-quarter performance and sustained momentum in artificial intelligence (AI)-driven exports, which UBS said are providing a firm foundation for growth despite geopolitical and energy risks. Taiwan’s GDP expanded 13.69 percent year-on-year in the first quarter, the fastest growth since the second quarter of 1987, the Directorate-General of Budget, Accounting and Statistics (DGBAS) reported on Thursday. On a seasonally
Ryanair, Transavia, Volotea and other low-cost airlines are feeling the financial pain from high jet fuel prices as a result of the Middle East war and are cutting flights. The closure of the Strait of Hormuz has taken a huge chunk of oil supplies off the market, sending the price of jet fuel soaring and triggering fears of shortages that could force airlines to cancel flights. Airlines are not waiting for a lack of supplies to react. “Travel alert: Airlines are cutting thousands of flights right now,” Travel Therapy host Karen Schaler said in an Instagram reel this past weekend.
Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) have repeatedly hit new highs, but an equity analyst said the stock’s valuation remains within a reasonable range and any pullback would likely be technical. The contract chipmaker’s historical price-to-earnings (P/E) ratio has ranged between 20 and 30, Cathay Futures Consultant Co (國泰證期) analyst Tsai Ming-han (蔡明翰) told Central News Agency. With market consensus projecting that TSMC would post earnings per share of about NT$100 (US$3.17) this year, supported by strong global demand for artificial intelligence (AI) applications, and the stock currently trading at a P/E ratio of below 25, Tsai said the valuation
The list of Asian stocks that benefit from business partnership with Nvidia Corp is getting longer, as the region further integrates into the artificial intelligence (AI) chip giant’s business ecosystem. Just in the past week, South Korea’s LG Electronics Inc, Taiwan’s Nanya Technology Corp (南亞科技), as well as China’s Huizhou Desay SV Automotive Co (德賽西威) and Pateo Connect Technology Shanghai Corp (博泰車聯) have become the latest to rally on news of tie-ups, supply-chain participation or product collaboration with the US chip designer. Asian suppliers account for about 90 percent of Nvidia’s production costs, up from about 65 percent last year, data compiled
RSS