Gloomy stock performance on horizon: analysts

By John Liu, The China Post

TAIPEI, Taiwan — Concerns over mainland China’s stymied growth sent stock markets tumbling around the world last week, and without promising signs of recovery from China, some analysts predict sluggish stock performance in the near future for Taiwan. Chinese stocks plummeted as much as 11 percent during the first week of trading in 2016. The drop hit hard in Taiwan, where the stock index fell below the 8,000 mark. The weighted index on the Taiwan Stock Exchange has dropped about 400 points so far this year, plunging below the 10-year average at one point. Apple concept stocks such as Largan Precision Co. (大立光) saw the largest fall and only recovered on Friday, after the national stabilization fund was tapped to prop up the market. The global shockwave had an impact on mutual funds as well. Taiwan funds retreated 5.5 percent on average, with technology concept funds seeing the largest decline of 7 to 8 percent.

Precious metals — including gold — funds were relatively stable and produced a 2- to 5-percent return. Japanese yen funds, thanks to the currency’s appreciation, also posted a 2-percent return. Greater China concept funds saw the greatest setback and sank between 9 and 11 percent. Against this backdrop, Lu Tan-lan (呂丹嵐), a global fund manager at Fuh Hwa Securities Investment Trust (復華投信), predicted that periodic fluctuations will continue in capital markets around the world.

As such, he suggested picking stocks with growth potential, especially those originating from developed economies like the U.S., Japan and Europe. Fund manager Wu Win-zheng (吳英鎮) noted that share ratings in Taiwan and emerging economies for the most part stand at medium or medium-low level. The rating may only improve in the presence of an economic rebound, Wu said, adding that a normalized inventory level in the semiconductor sector between January and March may also help. ‘Conservative’ Outlook for Domestic Stock Market  Lee Cheng-yen (李政諺), an analyst at Tachan Securities (大展投顧), had a rather gloomy forecast for investing in the long run. The Chinese economy’s hard landing and Beijing’s structural reform are likely to result in excessive commodity supply and manufacturing capacity, which will in turn lead to the Chinese yuan’s depreciation, Lee said. Given Taiwan and mainland China’s close trade relationship, the slowed economic engine in China is bound to impact Taiwan’s performance, the analyst added. Foreign capital played a critical role in Taiwan’s stock market, and its continued net sell is a reflection of uncertainty in the world.

Domestic investors, on the other hand, may also pocket earnings before the soon-to-arrive Chinese New Year. All in all, Lee advocated a “conservative” stance for Taiwan’s stock performance, both in the short-term and long-term future.