Taiwan stock market to lose competitiveness: Schroders Investment

By Linger Liu,The China Post

TAIPEI, Taiwan — Taiwan’s stock market will see its economic competitiveness decline compared to other emerging economies, according to a forecast made by Schroders Investment and announced yesterday.

Allan Conway, head of emerging market equities for Schroders Investment, said Taiwan’s stock market is losing its price advantage compared to other countries in the emerging markets on the heels of its lackluster economy.

Conway said Schroders is currently evaluating emerging markets in Asia, with the review showing positive signs in South Korea, Thailand, Indonesia and India. Taiwan, according to the review, has less growth potential. The team leader said Schroders had recently removed a certain portion of its investment and capital out of Taiwan.

Schroders used Morgan Stanley Capital International (MSCI) Indices, which include South Korea and Taiwan as emerging markets. Taiwan’s Relatively Higher Stock Prices

The evaluation said Asia’s emerging markets remain positive due to political and economic stability. Conway said stock prices in Taiwan are relatively higher than other newly emerging countries. Taiwan relies heavily on exports and is therefore affected by weak trade due to the euro debt crisis and recent U.S. fiscal woes, said the team leader. He also said industries in Taiwan have seen their competitiveness fall in line with the global recession. Change in Stock Market

Apart from emerging markets, the current global economy, the team leader noted, is somewhat stagnant. The eurozone continues its struggles, the U.S. economy is forecast to see 2-percent GDP growth, and Japan is struggling with slow and weak economic recovery. Conway said due to the decline of three of Taiwan’s significant trade partners, it is reasonable to see weak export growth in the nation.

Conway said Taiwan will continue to lose it global economic competitiveness and is facing the social-welfare issues common to more developed countries. The team leader said problems such as aging may be contributing to economic struggle. 2-percent Growth Potential

According to the Morgan Stanley Capital International (MSCI) Indices, emerging economies generated 532.8 percent in accumulated profits in the period between August 1998 and December 2012. The indices show that the return on investment in emerging economies is around 13.7 percent, much higher than in other developed economies.

Conway said the indices only show the GDP growth of emerging markets, but do not directly indicate the elements that will contribute to investment growth. Developed countries face aging, debt, quantitative easing and low momentum in the stock market, according to the team leader. Emerging economies do not have such issues and enjoy better economic growth potential, said the team leader, adding that emerging economies have fewer debt issues. He said currencies in the emerging markets have not yet depreciated. Assuming developed economies do not fall into further dire straits, emerging economies are forecast to grow around 2 percent, said Conway.