An Asian brokerage has forecast that the Taiwan Capitalization Weighted Stock Index (TAIEX) will challenge the 9,500-point mark in 2017, with the semiconductor sector driving the gains.
In a research note Friday, the brokerage said that after two consecutive years of consolidation, Taiwan's integrated circuit industry will start gaining momentum this year and sales in the domestic semiconductor sector are likely to increase by an annual 9 percent on a cyclical uptrend in the memory chip business.
The brokerage also forecast that Taiwan's semiconductor sector will become more competitive globally in 2017 as the Taiwan dollar depreciates against the U.S. dollar and the U.S. Federal Reserve continues to raise interest rates.
In 2016, the weighted index on the local main board rose 915.44 points, or 10.98 percent, largely in reflection of strong foreign institutional buying.
The upturn continued into the first four trading sessions in 2017 and the weighted index closed at 9,372.22 points last Friday.
While the brokerage has forecast a rise in share prices in Taiwan this year, it has also cautioned that an interest rate hike cycle in the U.S. could cause volatility in the global financial markets.
The brokerage said that with the inauguration later this month of U.S. President-elect Donald Trump, who has been advocating protectionism, uncertainty over the global economy may affect equity markets worldwide.
In addition to its optimistic forecast for Taiwan's local semiconductor sector, the brokerage said it is also upbeat about stocks in the country's automation and automotive electronics industries.
In the high-tech sector, the brokerage said, it favors Taiwan Semiconductor Manufacturing Co. (???), the world's largest contract chip maker, and Hon Hai Precision Industry Co. (??), the world's largest contract electronics maker.
It also mentioned integrated circuit designer MediaTek Inc. (???), IC packaging and testing services providers Advanced Semiconductor Engineering Inc. (???), Powertech Technology Inc. (??), King Yuan Electronics Co. (???), power electronics test solution provider Chrom Ate Inc. (??) and auto component maker Cub Elecparts Inc. (??).
In the financial sector, the brokerage picked CTBC Financial Holding Co. (???) and Cathay Financial Holding Co. (???).
Among other non-electronics stocks, it chose pneumatic fastening tool maker BASSO Industry Corp. (??), bicycle brand Giant Manufacturing Co. (??) and biotech firm TCI Co. (??).
CNA cannot identify the brokerage because media outlets in Taiwan are not allowed to report the name of a foreign brokerage when it gives forecasts for specific stocks.
Source: Focus Taiwan News Channel