Taiwan’s shares to be resilient despite global volatility: analysts

Taipei, Despite volatility in the global markets, particularly on Wall Street, the local equity market is expected to be resilient due to the sound economic fundamentals in the country, market analysts said Saturday.

One of the upbeat analysts, Liao Che-hung (???), manager of Allianz Global Investors Taiwan Technology Fund, said it is inevitable that the local equity market will remain choppy in the short term amid worries over a global trade war, but he said in a longer term, local equities are expected to return to an upswing trend due to an economic recovery.

This week, the weighted index on the Taiwan Stock Exchange, or the Taiex, fell 204.37 points ,or 1.85 percent, to close at 10,823.33 points after a plunge on Friday, when the Taiex was down 182.51 points or 1.66 percent after U.S. President Donald Trump signed an order to impose tariffs on US$60 billion worth of Chinese imports.

China immediately hit back with tariffs of its own on 128 U.S. products, valued at US$3 billion.

After the losses in the Taiex, the market capitalization of the local main board fell NT$607.50 billion (US$20.81 billion), or 1.84 percent, from a week earlier to NT$32.46 trillion with foreign institutional investors registering a net sell of NT$1.29 billion worth of shares in the week, according to the TWSE.

But Taipei’s losses on Friday were not as steep as Japan’s 4.51 percent slump, Shanghai’s 3.39 percent dive, Seoul’s 3.18 percent drop and Hong Kong’s 2.45 percent decline. The data showed the Taiwan market appeared resilient compared with its regional counterparts despite the Dow Jones Industrial Average’s more than 700-point drop on Thursday.

Liao said Taiwanese firms are expected to see their profitability improving this year as the economy has been on the way to recovery, while a gradual increase in key interest rates by the U.S. Federal Reserve is expected to reduce the impact on the global economy from a rate hike cycle.

In February, the Directorate General of Budget, Accounting and Statistics raised its forecast for Taiwan’s 2018 GDP growth from 2.29 percent to 2.42 percent due to solid global demand.

After Friday’s losses, Liao said the local main board is expected to enter into consolidation mode in the short term to digest the rising pressure caused by the global volatility.

Yang Yuan-han (???), a manager of the Jih Sun Optimization Fund, agreed, saying uncertainty posed by a possible trade war between the U.S. and China could place more downward pressure on equities worldwide.

But Yang added that Washington still gave 60 days to China to negotiate on the impassive tariffs so there is a chance for both sides to avoid a trade war.

As for how to pick stocks, Liao said he preferred emerging technologies such as artificial intelligence, 5G, electric vehicles and the Internet of the Things.

Source: Focus Taiwan News Channel