Stock mar­ket to re­bound in the sec­ond half: UBS

The China Post - - TAIWAN BUSINESS - BY JOHN LIU

Low in­ter­est rates and a boom­ing elec­tron­ics sec­tor in the lat­ter half of the year are likely to drive the Tai­wan stock mar­ket in­dex to the 10,000-point mark, said Wil­liam Dong ( ), eq­ui­ties and re­search head of UBS Se­cu­ri­ties' Taipei branch.

The se­cu­ri­ties head made the com­ment at the an­nual UBS Tai­wan Con­fer­ence yesterday.

Dong pro­vided two rea­sons that the stock mar­ket will bounce back. The first one is lo­cal stocks’ rel­a­tively higher yields. Dong said low in­ter­est rates and con­se­quently easy ac­cess to money around the world will drive an in­flow of cap­i­tal in search of higher re­turns.

The sec­ond fac­tor is that the elec­tron­ics sec­tor will en­ter its high sea­son in the sec­ond half of the year. The ex­port mo­men­tum, although not as strong as last year, is still promis­ing, ac­cord­ing to Dong. In ad­di­tion

to

fun­da­men­tals, cap­i­tal flow also plays a crit­i­cal role in stock per­for­mance, Dong cau­tioned, adding that the lat­ter is more un­pre­dictable.

Un­cer­tainty in the

Fourth Quar­ter

Dong forecast the re­bound will oc­cur in the third quar­ter this year. How­ever, there will be more un­cer­tainty in the fourth quar­ter, and there are also two fac­tors that may have ad­verse im­pact on the lo­cal stock mar­ket as well.

One is the public’s an­tic­i­pa­tion that the U.S. Fed will raise in­ter­est rates in the third quar­ter, and there­fore re­duce money sup­ply in the cap­i­tal mar­ket.

The other un­cer­tainty is the pres­i­den­tial elec­tion that will take place on Jan. 16, 2016. Greater fluc­tu­a­tion is ex­pected in the mar­ket as elec­tion nears, Dong said.

In re­gards to the in­vest­ment ap­proach, Dong sug­gested a bal­anced in­vest­ment strat­egy, or rais­ing stakes in tech­nol­ogy and telecom­mu­ni­ca­tion con­cept stocks, while fo­cus­ing on the Ap­ple sup­ply chain and high-div­i­dend stocks in the lat­ter half of the year. This will sup­pos­edly reap higher and more sta­ble re­turns.

Greece’s debt cri­sis has af­fected stock mar­kets around the world. If Greece can­not re­solve the prob­lem at the end of month, it will con­tinue to af­fect global stock mar­kets, Dong said.

Tai­wan to See 3.3-per­cent

GDP Growth

UBS

Se­cu­ri­ties

forecast

that Tai­wan will see 3.3-per­cent GDP growth in 2015, down from 3.7 per­cent in 2014.

UBS con­trib­uted the slower growth to fall­ing ex­port prices, de­layed prof­itabil­ity for tech­no­log­i­cal prod­ucts, and emerg­ing mar­kets’ eco­nomic slow­down. They hurt Tai­wan’s PC ship­ments, semi­con­duc­tor in­ven­tory ad­just­ment and the mo­bile phone mar­ket in main­land China, Dong said.

As the econ­omy slowed, the stock mar­ket un­der­per­formed in the first half of 2015, UBS Se­cu­ri­ties noted. UBS an­a­lyst Arthur Hsieh ( ) said dis­trib­u­tors of elec­tron­ics hard­ware have started stock­ing in­ven­tory in prepa­ra­tion for higher de­mand. The ar­rival of Win­dows 10 is ex­pected to boost de­mand too.

Tai­wanese firms hold the edge in cell­phone shells, cam­eras and touch de­vices. With high en­try bar­ri­ers, Chi­nese com­peti­tors are not too much of a con­cern right now, Hsieh said.

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