Foreign brokerage cuts TAIEX target after Q2 data
Disappointed by Taiwan’s lower-than-expected gross domestic product growth for the second quarter of this year, a European brokerage has sharply cut its target for the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) on the main board.
The brokerage, which asked not to be named, has trimmed its target for the weighted index to 9,180 points from an earlier fore- cast of 9,900 points, citing concerns over outbound shipments of the bellwether electronics sector.
On Friday, the Directorate General of Budget, Accounting and Statistics (DGBAS) reported that Taiwan’s GDP rose only 0.64 percent, lagging far behind the DGBAS’s earlier estimate of a 3.05 percent.
The government agency said that the disappointing second quarter GDP growth largely re- sulted from worse-than-expected exports at a time when global demand remained weak. In the April-June period, Taiwan’s merchandise and service exports fell 1.30 percent from a year earlier, compared with an earlier forecast of 3.27 percent growth.
The weighted index on the Taiwan Stock Exchange closed down 0.16 percent to 8,665.34 points Friday after bargain hunting in the late trading session lifted se- lect large-cap stocks, helping the index recoup earlier losses, dealers said.
Despite the small gains in share prices in the latest session, sentiment toward the economy remained cautious in the wake of the second quarter GDP data, they said.
The brokerage said that the bottom line of the electronics sector could be eroded this year due to prolonged inventory adjustments, and such weakness in profitability could continue into next year.
A move by U.S. consumer electronics giant Apple Inc., which places large orders to its Taiwanese suppliers, to give a lowerthan-expected guidance for the three months to September bodes ill for Taiwan’s outbound shipments in the quarter, the brokerage said.
In an investor conference held in July, Apple forecast that its sales for the current quarter will range between US$49 billion and US$51 billion, missing an earlier market forecast of US$51.1 billion.
The brokerage said that fears have escalated that global demand in the fourth quarter and even in the first quarter of next year will also disappoint the market and shares in Taiwan could face downside risks.
While it has cut the TAIEX tar- get, the brokerage has picked five stocks for investors to invest in due to either their sound fundamentals or attractive valuations.
The five are food maker UniPresident Enterprises Corp., telecom operator Far EasTone Telecommunications Co., contract chip maker Taiwan Semiconductor Manufacturing Co., metal casing supplier Catcher Technology Co., and E. Sun Financial Holding Co.