Taiwan equity market could see support on sound fundamentals

Taipei, The local equity market is expected to see support despite recent volatility on Wall Street as the local economy remains on the path to recovery, and that could improve listed companies' bottom lines this year, analysts said Saturday.

They said the benchmark Taiwan Capitalization Weighted Stock Index (Taiex) on the main board is likely to see its nearest technical support at around the 120-day moving average of 10,693 points, and even if the market suffers further losses the next technical support could be seen at about the 240-day moving average of 10,430 points.

On Friday, the Taiex fell 87.62 points, or 0.81 percent, to close at 10,698.17, but came off an early low of 10,638.98. The local market appeared relatively resilient as the fall followed a 420 point plunge by the Dow Jones Industrial Average a day earlier, when U.S. President Donald Trump announced Washington will impose tariffs on steel and aluminum imports as early as next week.

For the week, the local main board fell 96.38 points or 0.89 percent after foreign institutional investors sold a net NT$20.28 billion (US$692 million) worth of shares in the wake of the plunge on Wall Street.

In addition to worries over a possible trade war in the global market caused by the tariffs announced by Washington, market sentiment has long been concerned that the U.S. Federal Reserve will speed up the pace of its interest rate hike cycle this year, dealers said.

Liao Che-hung (???), a manager of the Allianz Global Investors Taiwan Technology Fund, said he remained upbeat about Taiwan's industrial outlook and expected improving profitability at firms, especially in the high-tech sector, to serve as an anchor stabilizing the broader market at a time of instability on Wall Street.

Nomura Asset Management Taiwan said continued growth in the global economy is expected to prompt investors to pour more funds into equity markets, which should benefit Taiwan, adding liquidity-driven gains could continue to be the theme of the local stock market.

Liao said tech stocks focusing on cloud-based servers, 3D sensors, application-specific integrated circuit (ASIC) chip technologies as well as 5G development, could have a better chance of standing out in the market as these technologies have gained in popularity in applications throughout the global market.

In terms of the non-high tech sector, Ku Ko-chin (???), a manager at Jih Sun MIT Mainstream Fund, said he also recommends raw material stocks which have benefited from rising product prices on the global market and financial stocks which have lagged behind the broader market.

However, Liao said investors should pay close attention to how the Fed adjusts monetary policy, as that could move the U.S. dollar and impact fund flows on the global market.

When foreign institutional investors will slow down their local equity selling or even shift to the buy side is expected to dominate market sentiment in the short term after massive selling this week, he said.

Source: Focus Taiwan News Channel