UBS Se­cu­ri­ties low­ers its year-end forecast for TAIEX on weak de­mand

The China Post - - TAIWAN BUSINESS -

Swiss bro­ker­age firm UBS Se­cu­ri­ties low­ered its forecast for the TAIEX, the Tai­wan stock ex­change’s bench­mark in­dex, for the end of the year from 9,200 to 8,550 points Thurs­day, its fourth cut in over two months.

“We be­lieve one of the key drags on the mar­ket is a lack of fun­da­men­tal sup­port. In par­tic­u­lar, weak­ness in end-de­mand from emerg­ing mar­kets, in­clud- ing China, con­tin­ues to serve as a ma­jor head­wind for Tai­wan tech,” said Wil­liam Dong, eq­ui­ties and re­search head of UBS Se­cu­ri­ties’ Taipei branch.

“For non-tech sec­tors, in­clud­ing bi­cy­cles, tires and ma­te­ri­als, slow con­di­tions in China con­tinue to be a chal­lenge,” Dong wrote in a note to clients.

The an­a­lyst said he ex­pects Tai­wan’s ex­ports to re­main weak in the sec­ond half of this year and sees po­ten­tial down­side risk to UBS Se­cu­ri­ties’ forecast for Tai­wan’s mar­ket earn­ings growth of 8.2 per­cent in 2015.

With al­ready a mud­dled out­look in fun­da­men­tals, Dong said the re­cent de­pre­ci­a­tion of the Chi­nese yuan is adding to the un­cer­tainty.

“While we be­lieve a lower yuan should in­cre­men­tally help im­prove cost struc­tures for Tai­wanese com­pa­nies with oper­a­tions in China, on the flip side, it raises ques­tions about the state of end de­mand in China for Tai­wanese tech,” Dong said.

“Sep­a­rately, for Tai­wanese fi­nan­cials, we see the lower yuan as a po­ten­tial neg­a­tive as it may re­duce Chi­nese de­mand for off­shore U.S. dol­lar loans pro­vided by Tai­wanese banks,” he added.

As of 11:02 a.m. Thurs­day, the TAIEX had risen 0.13 per­cent to 8,294.20 points.

In a re­port dated June 4, UBS Se­cu­ri­ties dropped its TAIEX tar­get from 10,600 to 10,000 points, cit­ing con­cerns over fun­da­men­tals and un­cer­tainty over the out­come of the 2016 pres­i­den­tial elec­tion.

The bro­ker­age again low­ered its TAIEX tar­get in another re­port re­leased July 2 from 10,000 to 9,750 points, cit­ing po­ten­tial risk to earn­ings, and trimmed its tar­get for the third time July 17 from 9,750 to 9,200.

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