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.
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