Mon, Jun 05, 2000 page20

• NASDAQ's rise perks up TAIEX

  A revived NASDAQ, which recently has been hobbled by rising US interest rates, gave Taiwan investors reason to bid up shares. But analysts remain cautious, saying there are few reasons to be bullish

  • By Michael Logan / STAFF REPORTER
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  A 19 percent jump in the NASDAQ last week put a little pep in the step of the TAIEX, which often follows the US technology stock index.

  Economic data released last week suggests US inflation is in check -- thus easing concerns that the US Federal Open Market Committee may hike interest rates again later this month. Local investors have been worried that rising rates and the NASDAQ's recent woes would mean less demand for Taiwan's exports.

  After falling 2.9 percent in the May 22 to May 26 period, the nation's main index rose 4.4 percent last week, up 376.18 to 8,935.64. The TAISDAQ, meanwhile, rose 21.43, or 8.5 percent, to 272.68.

  Still, market watchers remain cautious, saying there's little expected news on the horizon that would lead to a broad-based share rally.

  "What kind of news would you expect to push the market?" said Eric Ni, associate vice president at Taiwan International Securities (金鼎證券). "Improved cross-strait relations? No way."

  Ni, who has made a few bearish bets recently, said a dearth of good news to boost the market's confidence would likely lead to a slowdown this week, with the main index possibly retesting 8,500.

  "I don't think there will be a quick swift rally," Ni said. "But still, ICs will be the targets. People will buy on the lows," he said, adding that investors view companies such as Taiwan Semiconductor Manufacturing Co (台積電) and United Microelectronics Corp (聯電) as "safe harbors."

  Earlier this week, industry group Worldwide Semiconductor Trade Statistics (WSTS) said it expects global chip sales to rise 31 percent this year to US$195 billion.

  The group also said it anticipates sales growth won't let up until 2003, when chips revenues are forecast to hit US$289 billion.

  Memory makers move

  But Ni remains guarded, and not even a rise in DRAM shares was enough to get his blood pumping.

  Memory chipmakers climbed last week, with DRAM spot prices reaching as high as US$7.21 on Friday, according to the American IC Exchange. "The good news has been well discounted," Ni said.

  Grace Li, researcher manager at Masterlink Securities (元富), was more upbeat, saying Taiwan's largest DRAM maker still had room to climb 30 percent higher. Winbond Electronics (華邦電子) closed at NT$97.5 on Saturday, up 15.4 percent for the week.

  "We've been seeing the spot price rising," Li said. "It's a sign of the current hot season."

  Other DRAM makers also rose, in line with the 22.6 percent ascent of the world's largest memory maker, Micron Technology of the US.

  ProMOS (茂德科技) rose 12.4 percent to NT$140.5, while sister company Mosel Vitelic (台灣茂矽) climbed 10.3 percent to NT$85.5. Powerchip Semiconductor soared 23.6 percent to NT$78.5.

  WSTS expects worldwide DRAM sales to grow 37 percent this year to US$28.4 billion. The group further anticipates the industry will expand 21 percent annually between 1999 and 2003.

  Market research firm Dataquest is less optimistic, saying demand will likely peak in 2002. The group has forecast that demand for DRAM chips will exceed supply starting mid-year, with contract prices reaching US$7 to US$7.50 in the third quarter.

  Revised forecasts

  In the week ahead, Li said to keep an eye on Internet-related shares, as the revived NASDAQ has renewed interest in companies such as Systex Corp (精業), which owns Internet portal Kimo.com.

  She also likes design houses such as Faraday Technology and Realtek Semiconductor in addition to chip testers and packagers.

  But like Ni, Li also expressed a note of caution, saying investors should consider locking in gains of between 20 percent and 30 percent. "You just have to take the gains and walk away," she said.

  Li also said she expects the TAIEX to reach 9,800 before early July -- but no higher.

  That "will be the last high for the year," at which time investors should take their money off the table, she said.

  As for earlier projections from many analysts that put the nation's main index as high as 13,000 for the year, Li said, "I don't think they're good anymore."

  Those were "based on the hypothesis that US stocks would not have a major setback as they have," Li said. "The NASDAQ's fall is bigger than what the companies can take."

  Her own projection had ranged between 11,500 and 12,000.

  In addition, year over year sales growth hasn't been as stellar as was earlier forecast.

  "People have to face the fact that the momentum decides the whole year," Li said.

  "The first five months were just moderate. There's no reason to be so optimistic."
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