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Taiwan’s equity market movement hinges on foreign investors

Taiwan’s equity market movement hinges on foreign investors

TAIPEI: The question of whether the local equity market will continue its strong showing in 2017 depends on the actions of foreign institutional investors, analysts said Monday.

Liao Che-hung, the manager of the Allianz Global Investors Taiwan Technology Fund, said foreign institutional buying was the main driving force behind the more than 10 percent increase in share prices on the local main board in 2016.

He however noted that after the United States Federal Reserve hiked interest rates in December, the U.S. dollar strengthened, which prompted foreign investors to move their funds into U.S. dollar-denominated assets. The movement of Taiwan’s equity market in 2017 will depend on whether foreign institutional investors start aggressive buying in Taiwan stocks when they return after the New Year holiday, Liao said.

In 2016, the weighted index on the Taiwan Stock Exchange gained 915.44 points, or 10.98 percent, with foreign institutional investors buying a net NT$300 billion (US$9.37 billion) worth of shares.

Market capitalization of the main board as of the end of 2016 was NT$2.74 trillion higher than the previous year, which translated into an average gain of about NT$285,800 by each of the 9.59 million equity investors in the Taiwan market for 2016.

Chang Ya-wei, manager of the Jih Sun Fund, said he expects light trading by foreign institutional investors in January as there are only 16 trading sessions this month. The actions of foreign institutional investors will not become clear until after the Lunar New Year holiday, which lasts from Jan. 27 to Feb. 1, he said. One of the factors is that U.S. President-elect Donald Trump will take office on Jan. 20 and his economic policies may impact global financial markets and the strategies of foreign institutional investors in emerging markets, including Taiwan, Chang said.

Also in January, the four-day Consumer Electronics Show will be held in Los Vegas, which may spur buying in electronics stocks, while efforts by international brands to build their inventories ahead of the Lunar New Year holiday may also boost local high-tech stocks, he said.

He suggested that investors keep an eye on suppliers in the Apple Inc. chain as the company is expected to unveil its iPhone 8 later this year.

Liao expressed a similar view, saying the launch of the new iPhones might spur waves of replacements this year, which would benefit local high-tech stocks such as Hon Hai Precision Industry Co.  an assembler of iPhones and iPads, and Largan Precision Co. a smartphone camera lens supplier to Apple.

Liao said that he was upbeat about the growth of listed companies in Taiwan and he predicted that their earnings would rise about an annual 11 percent, leading the movement of local equity prices.

He suggested that investors keep close watch on the prices of flat panels and dynamic random access memory chips as continued growth of those stocks this year would also help boost the local equity market.