Y2K-related fears appeared to take their toll late last week, as some investors reasoned it was better to wait out the year 2000 changeover on the sidelines. But then a tech-led rally Saturday helped put the TAIEX into positive territory.
After dropping 2.8 percent in the Dec. 6 to Dec. 10 period, the TAIEX rose 0.8 percent last week to finish Saturday at 7,797.87. Were it not for Saturday's rally, the index would have finished the week practically unchanged from its Dec. 10 close.
But there were a few bright spots. DRAM shares gained amid optimism for strong sales next year with Microsoft's long-awaited release of Windows 2000. The new system will require 128Mbit capacity, compared to 64Mbit capacity for Windows 98.
Powerchip Semiconductor climbed 18.6 percent to NT$51.50, while Mosel Vitelic rose 16.9 percent to NT$38.60. Winbond Electronics (
Vanguard International put in an 11.4 percent gain to finish at NT$36. Promos rose 6.9 percent higher, ending at NT$76.50.
Meanwhile, TSMC (
In addition, investors continued to show interest in the so-called "telecom concept" companies, or firms that also own telecommunications businesses.
Taiwan Cement (
But Pacific Electric & Wire (
The companies that make mobile phone handsets and other telecommunications products also put in a respectable performance last week. Tecom Ltd (
Acer Peripherals, handset manufacturer and TFT-LCD supplier, rose 4.2 percent to NT$123. According to investment house National Securities Corp, there were market rumors earlier in the week that Acer Peripherals had won a cell phone order from Finland-based Nokia.
Analysts expect stocks to trade this week between 7,600 and 8,000, with psychological resistance at 8,000.
Accton a `momentum play'
Accton Technology Corp, the Hsinchu-based maker of computer networking devices, has been the latest company to benefit from investors' insatiable appetite for Internet stocks.
On Tuesday, Accton said it had teamed up with Hong Kong-based Chinadotcom in a US$30 million joint venture to provide on-line news and business services to Taiwan's four million Web users. According to both companies, Chinadotcom would own 60 percent of the joint venture, while Accton would own 40 percent.
Accton shares finished the week at NT$108.50 -- up 38.2 percent since its Dec. 10 close. Shares of Chinadotcom in the US also surged on the news, climbing 22.8 percent on the NASDAQ after the announcement.
According to some analysts, the market believes Accton will eventually peak at NT$130, or 19.8 percent higher than its Saturday close.
But not everyone is so sure.
"The story is not one of fundamentals. It's a momentum play," said Dominic Grant, an equities analyst at Primasia Securities, who rates Accton as a "hold." In Grant's eyes, the Chinadotcom deal will have a "negligible effect on [Accton's] earnings," and the stock long ago marched past his target price of NT$60 per share.
"There's no reason to pay 50 times earnings," he said. "There's little justification for buying something so expensive."
Grant said Accton has been swept up in the euphoria for Internet plays which, in recent weeks, has helped boost shares of companies such as President Chain Stores (
Still, Grant said he couldn't see abandoning traditional valuation measures -- such as price-earnings ratios -- in favor of a "new paradigm," whereby the worth of Internet companies is instead measured by gauges such as "eye balls," or the number visitors to a Web site. Under the new paradigm, US and European Internet companies that have little or no earnings have commanded billion-dollar market capitalizations.
"It's very difficult for analysts to look at a stock like Accton," Grant said. "My job is to look a the fundamentals of a company. You have to start somewhere."
While Grant is advising clients to hold Accton, Jovi Chen, equities analyst for China Securities, is telling his clients to sell.
"The core business is promising," Chen said. "But it doesn't support the current share price."
Although Chen said he's bullish on business-to-business e-commerce in Taiwan, he doesn't favor Accton's business-to-consumer focus, "which we don't think will have a big future."
Investors are perhaps betting Accton's partnership with Chinadotcom will turn Accton into a major Internet powerhouse. The company already runs the url.com.tw Web portal which has, by some estimates, roughly 900,000 registered users of its free e-mail service.
In addition, Chinadotcom and Accton in the future may list the joint venture on the NASDAQ, according to Taiwan International Securities Corp. A US listing would give Accton ownership of stock paper potentially worth billions.
But Chen said investors will in the long-run favor the Internet's largest players, such as Systex Corp (
And like Grant, Chen looks to valuations measures such as earnings, and he estimates url.com.tw contributes very little, if anything, to Accton's bottom line.
"Something like Accton, it will only be a one-time shot," Chen said. "People don't want to own a bad apple. They will want to own the best."
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