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Mutual funds on local bourse forecast to gain in Q1

TAIPEI -- Mutual funds that invest in the local bourse are expected to post gains in the first quarter of this year on hopes that shares on the Taiwan Stock Exchange will rise on the back of a recovery in the global economy, J.P. Morgan Asset Management said yesterday.

In addition, ample liquidity is expected to support local share prices as local employers tend to give year-end bonuses to their employees ahead of the Lunar New Year holiday, which will fall this year between Feb. 9 and Feb. 17, the fund management firm said.

J.P. Morgan Asset Management, which even dubs the first-quarter gains in the local bourse the “red envelope effect,” cited records as showing that first-quarter upside recorded by mutual funds targeting the local bourse averaged 8 percent in the past.

Among the gaining mutual funds, some funds investing in small- and mid-cap stocks in the local bourse even posted gains of 11 percent on average in the past due to high liquidity, the fund management firm said.

In 2012, the benchmark weighted index on the Taiwan Stock Exchange rose 627.42 points, or 8.87 percent to close at 7,699.50 points and finished in the middle of the pack among markets in East Asia.

After a four-day New Year holiday, the local bourse is scheduled to reopen today.

Yeh Hung-ju, a fund manger with JF Taiwan Best Selection Fund under J.P. Morgan Asset Management, said recent economic data in the United States and China show signs of improvement, adding that Taiwan's economy is expected to stage a rebound under the favorable global environment.

The government has raised its forecast for the country's economic growth for 2013 to 3.15 percent from an earlier estimate of 3.09 percent, compared with an estimate of 1.13 percent for 2012.

Yeh said the local economy showed signs of a recovery in the fourth quarter of last year and is expected to improve quarter by quarter this year.

He said the positive leads from the world's economic fundamentals are expected to expand the appetites of investors here to take risks, which will drive local share prices higher.

Yeh said that profitability of local businesses had bottomed out by the end of last year and that the bottom line is expected to return to a growth pattern starting from this year, adding that higher earnings per share of local enterprises are expected to lead share price growth.

The fund manger said that as the stock market is a leading indicator of the economy, local share prices are expected to rise in the first quarter of this year in reflection of such an upbeat anticipation about economic fundamentals before real economic numbers are released.

He said Chinese buyers of local electronics devices are expected to restock their inventories ahead of the Lunar New Year holiday to raise Taiwanese high-tech firm sales, which will further stir up investors' buying interest in shares of these exporters.

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