Taipei, March 7 (CNA) A U.S. brokerage has cut a target of the benchmark weighted index on the Taiwan Stock Exchange or the Taiex to 12,000 points for this year, citing concerns over the economic impact resulting from a spread of the novel coronavirus (COVID-19).
In a recent research note, the American securities house said as an exports-oriented economy, Taiwan is expected to feel the pinch resulting from the impact from the virus contagion worldwide which could hurt global demand.
As a result, the brokerage has lowered its target for the Taiex for 2020 by 500 points from its previous estimate to 12,000, while it has also lowered projected earnings by Taiwanese firms listed on the equity market by 3 percent for this year.
Amid the rising escalating scare over the virus spread, the Taiex fell 202.93 points or 1.77 percent in February as foreign institutional investors registered a net sell of about NT$130 billion (US$4.33 billion) in the month.
Volatility continued into March as investors saw heavy losses on the U.S. markets in the wake of a spike in the number of confirmed cases outside China, where the virus originated.
The Taiex experienced a roller-coaster ride in the first week of March, staging a technical rebound by only 0.26 percent from the end of February. On Friday, the main board closed at 11,321.81 points.
The brokerage said high tech gadget suppliers in Taiwan are expected to see deferred orders this year due to the impact on global demand caused by the virus spread, while outbound sales in products rolled out by Taiwanese traditional industries could fall.
If the COVID-19 contagion hits its peak and starts to ease at the end of March, the brokerage said, Taiwan's gross domestic product (GDP) for 2020 is expected to grow 2.6 percent, a downgrade of a 0.4 percentage points from the securities house' previous estimate.
The forecast seemed to be much more upbeat compared with Standard Chartered, which has lowered its forecast for Taiwan's GDP growth to 1.9 percent from an earlier estimate of 2.2 percent.
The brokerage said Apple Inc. issued a statement in mid-February, saying that it is unlikely to meet its sales guidance ranging between US$63 and US$67 billion for the January-March period on lower iPhone production and weaker Chinese demand resulting from the outbreak which started at the end of December. That served as a warning to many of its Taiwanese suppliers.
To a market estimate, Apple's suppliers including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), account for about 40 percent of the total market capitalization of the local equity market.
The brokerage noted that China has come up with lockdown measures of about 50 cities to contain the spread of the virus, which has limited people movement and hampered production of factories out there.
The brokerage said it is possible for "Apple concept stocks," in particular in the downstream electronics segment, to see a more apparent impact on their bottom lines for the first quarter of this year.
The upstream segment of the semiconductor industry, however, could be resilient despite the virus impact since inventories in the segment have fallen significantly, the brokerage said, adding that TSMC, the world's largest contract chipmaker, has still seen its production capacity fully utilized.
While the brokerage has cut the Taiex target, it remained upbeat about the following 10 stocks, recommending a buy on them.
The 10 stocks are TSMC, integrated circuit designers MediaTek Inc. and Novatek Microelectronics Corp., IC packaging and testing services provider ASE Technology Co., silicon wafer supplier GlobalWafers Co, server maker Wiwynn Corp., internet connection equipment vendor Accton Technology Corp., PC brand Micro-Star International Co., E. Sun Financial Holding Co., and cosmetics distributor POYA International Co.
Source: Focus Taiwan News Channel