Taipei--Taiwan's stock market is expected to climb out of its current doldrums because of healthy economic fundamentals, especially in the second half of this year, and high liquidity, according to UPAMC Taiwan Power Fund manager Liu Po-yen (???).
Liu, an analyst with Uni-President Asset Management Co. (????), said in a research note that any correction in share prices could provide investors with a good buying point to take advantage of relatively low valuations.
The weighted index on the Taiwan Stock Exchange closed above 10,000, at 10,001.48, on May 11 for the first time since April 11, 2000, as foreign institutional investors bought into large cap stocks, especially in the bellwether electronics sector.
The market then moved in a narrow range but stayed above the 10,000-point barrier in subsequent sessions, only to tumble back below the threshold on May 18 after political uncertainty in the United States sent the Dow Jones Industrial Average plunging more than 300 points.
The local market's weakness continued on Friday, when the weighted index closed lower at 9,947.62.
Liu said that after the index breached 10,000 points last week, turnover failed to expand, indicating that investors had turned cautious over a possible technical pullback and were reluctant to chase prices.
He said investors seized on the turmoil on Wall Street to dump local shares and lock in profits as U.S. President Donald Trump became further embroiled in a scandal surrounding his presidential campaign's connections with Russia.
Though there appear to be few incentives that could draw investors to push Taiwan's market higher in the near future, Liu said the domestic economy is recovering, and the improvement should continue into the second half of the year and boost stock prices then.
Liu said he remained upbeat on the market's prospects for the rest of the year, expecting that Taiwan's exports should pick up momentum as international electronics brands, including Apple Inc., unveil new gadgets to stimulate global demand.
The market has high hopes for the next generation of iPhones, which are expected to be upgraded significantly for the device's 10th anniversary and trigger replacement buying, which would benefit Taiwanese suppliers in the Apple supply chain, Liu said.
Taiwanese suppliers to Apple, such as contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC, ???) and contract electronics producer Hon Hai Precision Industry Co. (??), account for more than 40 percent of the market capitalization of Taiwan's main stock exchange and over-the-counter market.
Liu said Taiwan's stock market is flush with liquidity as foreign investors have continued to move funds into the region over the past few months, and that liquidity could drive a market upturn in the future.
According to Bloomberg, foreign institutional investors moved a net US$16.5 billion in funds into Taiwan over the past 12 months, the highest injection of funds into any market in the region.
Source: Focus Taiwan News Channel