TAIPEI, Taiwan — The Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) on the main board is expected to challenge the 10,700 point mark in the second half of this year at a time when the economy at home and abroad is on the path to recovery, according to Capital Securities.
The securities house said that an improvement in economic fundamentals is expected to serve as a driver to the upturn of the weighted index, adding that the main board could move between 10,300 points and 10,700 points over the next six months.
The Directorate-General of Budget, Accounting and Statistics has raised its forecast of Taiwan’s gross domestic product (GDP) growth for 2017 to 2.05 percent from an earlier estimate of 1.92 percent due to the rising global demand.
Capital Securities agreed that Taiwan’s GDP will grow more than 2 percent this year.
Moreover, the brokerage said, the United States, the world’s largest economy, is expected to see its GDP grow about 2.2 percent in 2017, up from 1.6 percent in 2016, while the eurozone is also on the way to improving.
As a result, the securities house said that Taiwan’s equity market is expected to continue steaming ahead under such favorable circumstances.
On Friday, the weighted index on the main board rose 0.68 percent to reach 10,156.73 points as the electronics sector staged a rebound, led by contract chip maker Taiwan Semiconductor Manufacturing Co. (TSMC,台積電) and contract electronics maker Hon Hai Precision Industry Co. (鴻海).
The main board closed above the 10,000 mark on May 11 for the first time in 17 years, while it fell back to some extent to end below that mark in the following sessions.
But since May 23, the weighted index has returned to 10,000 points and stood well above that level due to foreign institutional buying.
Capital Securities said that the local electronics sector has played an important role in the global supply chain and large-cap stocks such as TSMC, Hon Hai and smartphone camera lens maker Largan Precision Co., could continue to move higher in the second half of the year as long as foreign institutional buying continued.
According to the TWSE, foreign institutional investors have recorded a net buy of about NT$240 billion (US$7.92 billion) so far this year.
Lin Shih-ping (林世彬), manager of the UPAMC Small And Medium Cap Fund, agreed, saying an uptrend of local equities is expected to continue as the profitability of listed companies has been improving.
Lin cited TWSE data as saying that the profit of listed companies on the main board and the over-the-counter market for the first quarter rose more than 27 percent from a year earlier, and the growth for the entire 2017 could hit 10 percent.
Echoing Capital Securities, Lin said that the high-tech sector will remain the mainstream in the local equity market due to a promising outlook, and even if any correction hits the broader market, the electronics field is expected to continue to lend support to the index.
Since the U.S. Federal Reserve will downsize its balance sheet by cutting its holdings in bonds and assets later this year, however, the local equity market could face some turbulence in the fourth quarter, Capital Securities said.