Fubon Securities Investment Services Co (富邦投顧) sees the combined profit of all local publicly traded firms rising 30 percent year-on-year to NT$3.3 trillion (US$117.9 billion) this year, laying a foundation for the TAIEX to advance, Fubon Securities Investment Services chairman Charles Hsiao (蕭乾祥) said in a videoconference yesterday.
The company has an upbeat outlook on local companies on the back of the nation’s strong export orders, which hit a record high of US$256.1 billion in the first five months of the year, as well as their robust profit growth in the first quarter, Hsiao said.
The firm expects the average forward price-to-earnings (PE) ratio of local listed shares to be 14 to 17, and the TAIEX to be in the 15,000 to 18,600 points range by the end of this year, he said.
Photo courtesy of Fubon Financial Holding Co
Unlike trailing PE ratio, the ratio of a company’s current share price to its past earnings per share, forward PE ratio uses a company’s estimated future earnings and indicates whether a share is worth buying.
However, given that the TAIEX is at a comparatively high level and foreign institutional investors have been net sellers of local stocks in the past two months, it is likely that volatility would increase in the second half of the year, he added.
Hsiao recommended that investors hedge against that volatility in four sectors — chipmakers; suppliers of high-speed communications equipment; green energy, and sports and leisure, such as sports equipment and apparel makers.
In related news, the net foreign fund outflow totaled US$1.91 billion last month, the highest in a single month this year, Financial Supervisory Commission data showed.
The outflows could be attributed to foreign investors selling a net NT$51.03 billion of local shares last month, Taiwan Stock Exchange data showed.
In the first six months of the year, foreign institutional investors sold a net NT$382.7 billion of local shares.
That breaks down into a net sale of NT$384.7 billion of shares listed on the Taiwan Stock Exchange and a net purchase of NT$2 billion of shares listed on the Taipei Exchange, commission data showed.
However, Taiwan posted a net foreign fund inflow of US$10.91 billion in the first half of this year.
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