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May 30, 2017

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UBS upbeat on Taiwan's economic growth prospects

TAIPEI, Taiwan -- Thanks to increasing demand for IT products around the globe, UBS is optimistic that Taiwan will achieve 4-percent GDP growth this year, surpassing South Korea's economic performance.

Pu Yonghao (浦永灝), UBS Wealth Management's chief investment officer for the north Asia Pacific region, made the optimistic forecast during an investment outlook presentation yesterday.

UBS predicted at the start of the year that Taiwan will see 4-percent GDP growth in 2014, and Pu said he is still optimistic about the forecast.

Taiwan's exports are set to improve thanks to economic recoveries in western countries, Pu said. South Korea will see economic recovery as well, but a greater portion of its products are exported to mainland China, which is currently experiencing rather slack recovery. This will take a toll on South Korea's economy, UBS predicted

As more IT products are being rolled out in mainland China, and with the Chinese government aiming to nationalize IT industries, Taiwan also has an edge over South Korea, UBS said.

Home Prices to Decline

UBS also predicted a slowdown in Taiwan's rising home prices, as a similar phenomenon recently occurred in real estate markets across Hong Kong, Singapore and mainland China. There has been substantial decline in China's housing prices, Pu said, adding that home prices in Hangzhou city have dropped by 10 percent.

Pu said that he supports the government's policy to build more social housing complexes. Government social housing makes up more than half of Hong Kong's apartments, and 86 percent of Singapore's apartments are social housing too, according to Pu. The Chinese government is also constructing more social housing in an effort to promote social stability and reduce the gap between rich and poor.

Stock Market May Hit, 9500 Points

With improvement in exports, consumer confidence and strong IT industries around the globe, Pu said that Taiwan's stock market is likely to hit 9,500 points in the future.

Taiwan has an unemployment rate of 4 percent and has relatively high home prices, widening the gap between the rich and poor. But UBS believes positive factors outweigh the negative ones.

Pu pointed out that Taiwan's stock market performed the best in the Asia Pacific region. As of May 25, the market rose 5 percent, which was better than performance in Japan and mainland China as well as the global average of 2.5 percent. Taiwan's economy benefited from recovery around the world, particularly in the U.S., Pu said. Most of the capital will flow into the local technology industry, Pu added.

The determining factor for the third quarter's economic performance will depend very much on private businesses' performances, Pu said, adding that the trend favors the local stock market.

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