U.S. brokerage maintains TAIEX target of 9,500 points

A U.S.-based brokerage has left unchanged its target for the benchmark Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) on the local main board at 9,500 points, despite the volatility since the U.S. presidential election.

In a research note, the U.S. brokerage said it remained upbeat about the outlook for the local equity market as Taiwan's economy has been showing signs of improving, which is expected to prop up share prices.

The improved economic fundamentals in Taiwan, which are likley to boost the bottom lines of listed companies, have made the local equity market relatively attractive in terms of valuation, the brokerage said.

CNA cannot identify the brokerage because media outlets in Taiwan are not allowed to report the name of a foreign brokerage when it gives price forecasts for specific stocks.

Taiwan's gross domestic product (GDP) rose 2.06 percent in the third quarter year-on-year, beating the 1.99 percent forecast made in August, due to stronger private consumption and higher capital formation.

In mid-August, the Directorate General of Budget, Accounting and Statistics (DGBAS) forecast that the local GDP for 2016 would rise 1.22 percent.

After the third-quarter data was released in late October, DGBAS officials said the 2016 GDP could hit 1.24 percent increase, but an official forecast will come later in the month.

On Friday, the weighted index on the main board closed down 194.42 points, or 2.12 percent, at 8,957.76, led by the bellwether electronics sector as investors here took cues from the losses on the tech-heavy NASDAQ index in the U.S. market on Thursday.

The hit suffered by electronics stocks at home and on Wall Street came amid speculation that U.S. President-elect Donald Trump might draft policies unfavorable to high-tech firms in the U.S. market, which would affect Taiwanese suppliers in the U.S. brands' supply chain.

This week, the local main board fell 1.22 percent from a week earlier after foreign institutional investors sold a net NT$40.35 billion worth of shares.

However, citing optimism toward the local equity market, the U.S. brokerage said investors should build a balanced portfolio by focusing on both high-tech stocks and defensive stocks such as telecom operators and consumer product vendors.

Among the stocks the brokerage named were contract chip maker Taiwan Semiconductor Manufacturing Co. (???), the most heavily weighted stock here, smartphone camera lens supplier Largan Precision Co. (???), and notebook computer ODM services provider Quanta Computer Inc. (??).

In addition, the brokerage also recommended Chunghwa Telecom Co. (????), food maker Uni-President Enterprises Corp. (??), and Eclat Textile Co. (??) among several others.

The brokerage advised investors to stay alert to fund outflows when mapping out their investment strategies in the near term.

Source: Focus Taiwan News Channel